The Euro probably became short term oversold this morning into its lows and we suspect that the Eurowill derive a small and temporary bounce from the US durable goods report. However, the path of least resistanceis pointing downward because of deflationary fears from EU officials. Cushioning the Euro against the downside ispositive talk and positive consumer sentiment reports flowing from Italy. While the Euro might be oversold andcapable of a minor bounce, we would suggest that traders look to sell rallies in the Euro, looking for an eventualslide back below the 1.3600 level. The Commitments of Traders Futures and Options report as of May 20th forEuro showed Non-Commercial traders were net short 10,605 contracts, an increase of 8,361 contracts. TheCommercial traders were net long 34,674 contracts, an increase of 13,656 contracts. The Non-reportable traderswere net short 24,069 contracts, an increase of 5,296 contracts. Non-Commercial and Non-reportable combinedtraders held a net short position of 34,674 contracts. This represents an increase of 13,657 contracts in the netshort position held by these traders.
Technical Outlook: Momentum studies are still bearish but are now at oversold levels and will tend tosupport reversal action if it occurs. The market’s short-term trend is negative as the close remains below the 9-day moving average. The swing indicator gave a moderately negative reading with the close below the 1stsupport number. The next downside objective is 135.8950. The 9-day RSI under 30 indicates the market isapproaching oversold levels. The next area of resistance is around 136.4900 and 136.7350, while 1st support hitstoday at 136.0700 and below there at 135.8950.