While the Euro didn’t forge fresh record short positions in the latest report, given the additional declines since the report was measured, we have to think that the Euro is approaching a historically short spec positioning. However, ideas that Greece might be ushered to the EU exit by the Germans and further declines in crude oil prices looks to leave the deflationary vibe in place in the Euro. As we suggested in the Dollar coverage traders should expect follow through action in the Euro, but aggressive and long term position players could consider the purchase of 3 June 1.22 Euro calls and the sale of a Euro futures contract. In the event of more new lows in the Euro ahead, traders can liquidate the short futures and hold the calls at a slightly reduced cost exposure. Seeing Greece threaten to leave and seeing the ECB poised to launch QE should set the stage for a key low ahead perhaps later this week. The Commitments of Traders Futures and Options report as of December 30th for Euro showed Non-Commercial traders were net short 143,301 contracts, an increase of 4,194 contracts. The Commercial traders were net long 195,038 contracts, an increase of 4,558 contracts. The Non-reportable traders were net short 51,738 contracts, an increase of 365 contracts. Non-Commercial and Non-reportable combined traders held a net short position of 195,039 contracts. This represents an increase of 4,559 contracts in the net short position held by these traders.
Technical Outlook: The market was pushed to a new contract low. Momentum studies are declining, but have fallen to oversold levels. A negative signal for trend short-term was given on a close under the 9-bar moving average. The gap down on the day session chart is bearish with more selling pressure possible today. The market setup is somewhat negative with the close under the 1st swing support. The next downside target is now at 118.5100. Selling may soon dry up since the RSI is under 20 indicating the market is extremely oversold. The
next area of resistance is around 119.8700 and 120.3100, while 1st support hits today at 118.9700 and below there at 118.5100.