Saturday, January 7, 2012

As the Euro turns

Not more than a month after the US Federal Reserve tried to backdoor bailout Europe and the Euro by lowering the dollar swap-rates, the western currency has fallen well below its level at the time of the Fed intervention, and is falling towards the dangerous levels of 125.

Because of this inevitable fall, short action in the markets on the Euro is at an all-time, thus increasing the pressure on the Euro Zone, and the central bank's ability to purchase dollars.

The trend of relentless shorting of the Euro currency in the form of non-commercial spec contracts, and as reported by the Commitment of Traders, continues for one more week. As of January 3, EUR shorts rose by another 9%, hitting an unprecedented 138,909 net contracts short - a fresh all time record. What is curious that unlike previously, when an increase in EUR bearishness implicitly meant a increase in USD bullishness, this time that is no longer the case as net spec USD contracts actually declined, and are trading at relatively subdued levels. - Zerohedge

With this increased pressure on the downside, the markets are almost forcing the ECB and the Fed to intervene... and intervene soon.  These same short traders may very quickly reverse course if an whiff of QE3 comes to the forefront.


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