E$ gapped up on news that EU leaders agreed to extend a loan of up to E100 billion to help Spain recapitalize its banking sector. It closed at ard 1.2516 last Friday and opened at 1.2623 this morning, a cool 100+ pips!!! Though I wished I had held on to my long position from Friday but discipline to avoid over the weekend short term play saw me taking a small profit. No regrets because one fine Monday morning, the market will open against me because of some surprise fundamental news and the stop loss will be uncontrollable.
Last Friday during the NY session, EUR$ refuses to bottom out until it took out the stops below 1.2440. I was watching the price action and clearly market was so adamant. It attempted about 5 rounds until it succeed and then rebounded through the rest of the night into the closing. Currently, stops are lurking around 1.2690, 1.2600, 1.2385/80 (Large) and 1.2360.
As far as the positioning is concerned, latest CFTC speculative accounts reveal that short E$ has build to another record level at -214,418 vs last week's -203,415.
Technically, E$'s ability to open with such a sizeable gap indicates strength and potentially a trending direction. Remember that gap at 1.3080 on its way down? Honestly, I was expecting E$ to be pushed to retest recent low before the recovery but it is not to be.
I maintain that USD has seen an important top for now and market should move back to risk loving mood in the weeks ahead as mentioned in "Bulls continue to charge...." (7 Jun12). E$ may ride on this momentum to push towards 1.2800 this week.
For today, 1.2575/85 to hold and 1.2670/90 to cap for now. Prefer to buy on dips.
Always remember, the trend is your friend.
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| EUR$ Monthly Chart |
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