Following a new multi-year low in the wake of the Greek election results, the Euro has produced a vast turnaround that saw prices briefly climb all the way back into positive territory early this morning. With the ECB’s new QE program still front-and-center with the market, the last thing that the Euro zone need was a fresh risk event to rattle global markets. However, the Greek election has created a fresh source of anxiety for the Euro as the anti-austerity SYRIZA party is projected to take 149 seats, fractionally short of an absolute majority in Parliament. Only one other anti-austerity party was needed to form a government (the “Independent Greeks”), but the fact that a coalition was needed could help to moderate their stance in any upcoming confrontation with the “Troika” over spending and sovereign debt haircuts. A better than expected German IFO survey will be an added source of support, but it remains to be seen whether the Euro can build onto any recovery with the ECB’s new QE program weighing on prices and a still-uncertain situation in Greece. The Euro will continue to gyrate from the latest headlines out of Athens, but may need to hear positive comments both out of Greece and the “Troika” in order to climb back above the 1.1300 level. The Commitments of Traders Futures and Options report as of January 20th for Euro showed Non-Commercial traders were net short 176,490 contracts, an increase of 9,257 contracts. The Commercial traders were net long 234,155 contracts, an increase of 7,164 contracts. The Nonreportable traders were net short 57,665 contracts, a decrease of 2,092 contracts. Non-Commercial and Nonreportable combined traders held a net short position of 234,155 contracts. This represents an increase of 7,165 contracts in the net short position held by these traders.
Technical Outlook: The sell-off took the market to a new contract low. Momentum studies are still bearish but are now at oversold levels and will tend to support reversal action if it occurs. The close below the 9-day moving average is a negative short-term indicator for trend. It is a slightly negative indicator that the close was under the swing pivot. The next downside target is now at 109.7200. With a reading under 20, the 9-day RSI indicates the market is extremely oversold. The next area of resistance is around 113.4500 and 114.9200, while 1st support hits today at 110.8500 and below there at 109.7200.