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Net EUR Short Position Soars To All Time Record, Implies “Fair Value” Of EURUSD Below 1.20, Or Epic Short Squeeze

Posted By yihan On December 17, 2011 @ 4:50 am In Money Watch | Comments Disabled

Zero Hedge [1]
Saturday, December 17, 2011

It was only a matter of time before the bearish sentiment in the European currency surpassed the previous record of -113,890 net non-commercial short contracts. Sure enough, the CFTC’s COT report just announced that EUR shorts just soared by over 20% in the week ended December 13 to -116,457. This is an all time record, which means that speculators have never been more bearish on the European currency. Yet, the last time we hit this level, the EURUSD was below 1.20. Now we are over 1.30. In other words, the fair value of the EURUSD is about 1000 pips lower, and has been kept artificially high only due to massive repatriation of USD-denominated assets by French banks (as can be seen in the weekly update in custodial Treasury holdings [2]which just dropped by another $21 billion after a drop of $13 billion the week before). This means that the spec onslaught will sooner or later destroy the Maginot line of the French banks, leading to a waterfall collapse in the EURUSD, which due to another record high in implied correlation will send everything plunging, or if somehow there is a bazooka settlement, one which may well include the dilution of European paper, the shock and awe as shorts rush to cover will more than offset the natural drop in the EUR, potentially sending it as high as the previous cycle high of 1.50. If only briefly.

Three main FX pairs spec exposure:

Net EUR Short Position Soars To All Time Record, Implies Fair Value Of EURUSD Below 1.20, Or Epic Short Squeeze EUR%2012.16 [3]

And correlating the EURUSD and the net non-commercial spec position:

Net EUR Short Position Soars To All Time Record, Implies Fair Value Of EURUSD Below 1.20, Or Epic Short Squeeze EUR%20LT%20Shorts [4]


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URL to article: http://www.prisonplanet.com/net-eur-short-position-soars-to-all-time-record-implies-fair-value-of-eurusd-below-1-20-or-epic-short-squeeze.html

URLs in this post:

[1] Zero Hedge: http://www.zerohedge.com/news/net-eur-short-position-soars-all-time-record-implies-value-eurusd-below-120

[2] weekly update in custodial Treasury holdings: http://www.federalreserve.gov/releases/h41/hist/h41hist9.txt

[3] Image: http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2011/12/EUR%2012.16.jpg

[4] Image: http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2011/12/EUR%20LT%20Shorts.jpg

[5] EURUSD Soars On Reuters Report That Greek Deal Is Reached… Which Is Same Deal As July 2011: http://www.prisonplanet.com/eurusd-soars-on-reuters-report-that-greek-deal-is-reached-which-is-same-deal-as-july-2011.html

[6] Another Blatant EUR Intervention Leads To 150 pip EURUSD Move In Seconds: http://www.prisonplanet.com/another-blatant-eur-intervention-leads-to-150-pip-eurusd-move-in-seconds.html

[7] Ongoing Overnight Short Squeeze Takes Silver To Fresh 31 Year High: http://www.prisonplanet.com/ongoing-overnight-short-squeeze-takes-silver-to-fresh-31-year-high.html

[8] Chavez Gold Action Leads to Backwardation, Short Squeeze and ‘Havoc’ Concerns: http://www.prisonplanet.com/chavez-gold-action-leads-to-backwardation-short-squeeze-and-%e2%80%98havoc%e2%80%99-concerns.html

[9] EUR At 1.3507: Goldman EURUSD Re-Stop Time: http://www.prisonplanet.com/eur-at-1-3507-goldman-eurusd-re-stop-time.html

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