A Look At The EURUSD Runaway Covering Train

Submitted by Tyler Durden
05/05/2011 12:05 -0400
19 comments

There are those who are surprised by today's action in the EURUSD. We wonder why that is the case: had these people looked at our post from Saturday indicating the near record divergence between long EUR and short USD position, in which we speculated that the unwind would be fierce, today's Goldman call which we posted earlier, would be very much welcome. And yes, there was no margin hike in either EUR or USD spec contracts either last week or recently. We wonder why. So while we await the start of QE3 rumor reemergence, which will once again kill the dollar, and send the PM complex to the moon, here is what we said then...

EUR Non-Commercial Spec Positions Surge To Multi-Year High As USD And JPY Prepare To Take Out Lows (from Saturday) http://www.zerohedge.com/article/eur-no ... e-out-lows

Commodity speculators may or may not be the vile criminals the president and his new working group are making them out to be, but they sure have made their view clear on where they think the USD and the EUR (the JPY not so much) are going. Below is the latest update from the CFTC Commitment of traders report on the three key currencies. While there has been some modest short covering in both the USD and JPY, both continue to trade like the carry funding currencies they are. And with bullish spec positions in the EUR at a multi year highs, the only question is whether the yen or the dollar will be the carry currency of choice in the next beatdown. Of course, how the EUR is expected to retain its lofty perch with all of the PIIGS soon to go under is beyond us, but hopefully it makes sense to Trichet, who is stuck between an inflationary rock and a insolvent peripheral hard place.


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