Currency Update

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The charts above show that there is extreme pessimism against the Euro, and that the smart money commercial traders have built huge long positions in the Euro. Based on these alone we have to be skeptical of any further significant gains in the US dollar versus the Euro in coming weeks. The advance has been large and swift, but looks to be ready to give back some gains.

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This chart shows that the weekly RSI on the FXE euro trust ETF is very oversold and formed a reasonable weekly reversal at support. This added to the above data could actually indicate a long trade in the Euro with a stop below this week's low in FXE.

If the Euro bounces I expect grains to gain to, as they are basing in oversold regions and coming off very negative sentiment which should be a contrary trader's time to look for long entries.

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The Japanese Yen looks ready to move up now. I find this interesting because Japan and the US are two of the bigger more stable economies in the world. And Japan also has low interest rates and has been victim to carry trade currency losses. So in the recent move up in the US dollar, I thought maybe the Yen would gain too. But it only now looks ready. Maybe there is some sort of rotation going on here, but it seems like for those looking to play the fundamentals of the carry trade unwind, then going long the Yen here may be the way to do it, and give the US dollar a chance to settle down now that it has risen so much the last few months.