European Currencies At Resistance
Tiho Brkan | Nov 04, 2013 04:37AM ET
Chart 1: Speculators have built extremely large positions on the euro
Before reading the rest of the post, let me please remind you that the CFTC commitment of traders data is still delayed by about a week or so, due to the US government shutdown.
As we can see in the chart above, the euro pulled back sharply last week, just as it found itself near a major resistance area. At the same time, hedge funds and speculators have been holding a rather large net long position to the tune of over $12 billion. The previous two instances (late 2009 and middle of 2011) with positioning higher then $10 billion have led to substantial declines in the euro.
Chart 2: After huge net shorts, funds have turned long on the pound
A similar situation is also evident with the British pound (chart above) and Swiss franc (chart below). Both European currencies find themselves at a major resistance level, while from a contrary point of view, speculators have piled into the rally over the last few weeks - adding to the downside risk as positions get shaken out. Continue to monitor the price action in these three European currencies for further clues as to what the Dollar Index might do.
Chart 3: Swiss Franc finds itself at a critical resistance area
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