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Bluepoint daily market view – December 19, 2011

EUR rally eminent? The CFTC’s COT report just announced that EUR shorts just soared by over 20% in the week ended December 13 to -116,457. This is an all time record, which means that speculators have never been more bearish on the European currency. Yet, the last time we hit this level, the EURUSD was below 1.20. Now we are over 1.30. Some believe that the Euro has been kept artificially high only due to massive repatriation of USD-denominated assets back to Europe. Another view is that it shows Dollar weakness over the long term.

Whatever your reasonings there is a good Euro rally and ‘risk on’ trade coming, but it always gets a little more painful to shake the weak hands out before it starts. At the last moment the central banks will step in, they have no choice…

Daily Market View:

 

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