Caught Short Of The Euro?

Share On Facebook
share on Linkedin

Just for a change it may be best not to get involved in the Euro/Eurozone/European Union quagmire. Instead, the theme here today is the recent rise of the single currency and the sentiment attached to the cross versus the U.S. Dollar. Indeed, from trading perspective over the past two years there has been only one fundamental view (unless you have had a lobotomy or represent the ECB / the Brussels gravy train) to take regarding which direction this cross is heading for.

y, and even the suckers and their friends the muppets have been betting on the collapse of the Euro towards parity with a dollar, with a reasonably chunk of this motley brigade assuming that this wretched beast will disappear altogether. What has been even more interesting is that for long periods the open positions of traders were 80% or even 90% short. Even now after a 10 cent move higher in the past 7 weeks at IG Index 71% of clients are short.

But if you look at the influences on them, this is hardly surprising. As someone who has attended a series of trading seminars and events over the past couple with experts of various persuasions in terms of being technical or fundamental, or just plain clever, I do not remember even one person either backing the idea of the euro, or being in favour of buying the euro as a currency at time or any level – simply no debate. The only explanation is that no one wants to have it on their CV that they said buy the Euro just before its split back into the respective national currencies.

While it may of course be the correct that the big picture bear opinion is the one which proves to be correct, it is not always relevant to day-to-day trading, or even over a few weeks or months. One of the most stunning aspects of the financial markets since ECB President Mario Draghi said that he would do “whatever it takes to save the Euro” has been the rally from $1.21 in the currency from the time when he said it. This process has of course been accelerated by QE3 last week.

But the reason for this article is that Draghi’s warning to speculators not to be short of the Euro on August 2nd was the first time in my memory (nearly 40 years) that anyone not from an investment bank / financial markets guru / fund manager has ever delivered a piece of trading advice – and got it right. Indeed, it could turn out to be the trade / squeeze of the year, if as I suspect hardly anyone took heed of it, and actually did the opposite on the basis that you should normally do the opposite. After all, George Soros “breaking the Bank of England” 20 years ago was deliberately going against the will of the Treasury in the way that shorting the Euro last month what would have been calling the bluff of the Draghi last month.

But if you are short of the Euro and hurting at $1.30 plus, it would appear that you are in good company. On August 18th it was announced that Lord Rothschild (via RIT Partners) had made a £130m bet against the Euro. Indeed, this could have influenced many traders to get on the bandwagon – one that they may still be riding currently. In the end it may come down to who you believe in more: Rothschild or Draghi?

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.

Leave A Reply

 
Do you want to write for our Newspaper? Get in touch: newspaper@advfn.com

By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions

P: V: D:20200918 18:12:04