As we all know, the euro has been under pressure again lately, as well it might, given moribund politicians and problems with Club Med (PIIGS as we call them now).
But for me, one of the main themes this year may divergence between markets and economics. That is is possible is no surpsie for those of us who have been around long enough.
Check out this chart of the net euro short positions against the US dollar via the CFTC and Bloomberg. This is a weekly chart going back to 2000:
What do you see? A record number of euro shorts. This tell us that the path of least resistance might just be up!
The chart below shows the long term weekly euro chart which is analogous to the positioning chart above. It’s not a perfect uptrend line but euro might have some long term support its just bounced off:
Equally the chart below, which I spied over the weekend and added my own stuff suggests the euro just might be turning. A close above 1.2980 would be the first sign with 1.3245 the big resistance looming a few big figures higher:
This potential move fits with my current outlook of divergence between economies and markets and I don’t think that the rally is done yet. The Australian dollar’s weekly close was really strong as well – but I’ll write about that tomorrow.
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Please remember these are not recommendations for you to trade these are my views and I have my risk management tools and risk parameters that you do not have access to. Thus, this blog is for information only and does not constitute advice. Neither Greg McKenna nor Lighthouse Securities has taken your personal circumstances, objectives or financial situation into account. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation.