It's quite amazing how the world has changed in just a few months. Back in July traders were still piling into the short-euro trade. Nobody wanted to hear that it was becoming a "crowded trade" (
as discussed here) - after all the euro "can only go down". Since then these euro bears have endured pain, as the sentiment reversed sharply. The Goldman EUR/USD sentiment index, which is based on the CFTC statistics of speculative positions of futures traders, is moving deep into the bullish territory.
GS: - Net EUR long spec positioning continued to rise; at 80.4 percent our Sentiment Index (SI) is now at its highest level since May 2011
The fundamentals continue to support this position, with the ECB uninterested in pushing the euro lower (
see post). But the technicals will need to be watched closely for signs of overcrowding.
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| Source: GS |
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