I have received a lot of letters from my subscribers with the only question: “What’s up with the Euro?”
This is a very hot topic especially during the summer holiday period (joke)…
I should say that I do not know the future. However, I have my own view on this as a trader.
Therefore, I decided to publish a small post on this topic in my blog.
It’s no secret that I primarily rely on the net position of Commercial from Commitments of Traders when analyzing any market.
This is probably the most valuable source of information that I have found over the years of my trading.
Below you can see the Euro chart and the net position of this group participant. Here is a five-year period.
We see this group is selling the Euro since November of 2016 when was the US presidential election.
At present, their net shorts peaked in the five-year period. If we look at the history, we will see the market fall even at higher values of this indicator.
Here I think everything is clear, so I will continue…
The following picture shows the spread between the September Euro futures and the December Euro futures.
This tool reflects the desire of participants to buy.
We see the spread increases and this means the participants are not willing to pay more for the current contract.
I conclude that the growth of the Euro we see within three months does not reflect the reality because there is no demand.
Finally, another spread. This is the spread between the Euro and the dollar index.
Here we see the Euro strongly overbought relative to other currencies.
The last time we saw that at the end of 2014 and it ended with the fall of the Euro.
It’s hard to say when this setup is implemented.
However, we know that if we sell the Euro against the dollar in the spot market, we will receive a positive SWAP daily because of the interest rate differential that is present between these currencies now.
Thus we can hold the position long enough to earn the carry trade.
So if you are interested in getting my weekly reviews regarding the current market situation according to the described methods, please leave your email in the subscription and I’ll add you in a separate newsletter for this.If you enjoyed this article, please share it so others can find it!