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Euro Positioning Points to Reversal as Pair Breaches 1.40
Written by article default Thursday, 07 October 2010 10:33
EURUSD – The Euro has breached the 1.40 mark as crowds have continued selling into rallies, but a more recent pullback in short positions suggests that the pair could soon reverse. In the past we have advocated going against the crowd, and the ratio of long to short positions in the EURUSD stands at -1.62 as nearly 62% of traders are short. Yet yesterday the ratio was at -1.76 as 64% of open positions were short.Short positions are 8.9% lower than yesterday and 0.2% weaker since last week—surprising given continued EURUSD strength. Long positions are 1.0% lower than yesterday and 4.3% stronger since last week. Open interest is 6.0% weaker than yesterday and 0.8% above its monthly average.
The fact that SSI has not set a new low as price sets a new high shows a key divergence and suggests that the EURUSD may soon set an important top.
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