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By Jamie McGeever


NEW YORK, Dec 17 (Reuters) - Currency speculators in the


Chicago futures market dramatically flipped their bets on the


euro in the week to Dec. 14 to establish a net short position,


data from the Commodity Futures Trading Commission showed on




This is the first time International Monetary Market


accounts have been net short of euros -- effectively betting


that the currency will weaken -- in over three years.


But with the speculative market now heavily short of euros,


there is much greater scope for the currency to move back up


again and re-test its lifetime high of $1.3470 <EUR=> chalked


up on Dec. 7, analysts say.


"If the uptrend is intact in euro/dollar, this would


suggest you could see the next leg up in euro/dollar imminently


because the net short position is so extreme," said T.J. Marta,


senior currency strategist with RBC Capital Markets in New




According to the data, euro futures speculators established


a net short position of 14,542 contracts in the week to Dec. 14


compared to a net long position of 24,114 contracts the week


before. This marks a huge swing of 38,656 contracts in only a




Speculative accounts' positioning is sometimes used by


analysts as an indicator of future market direction. For


example, extreme net short positions often signal a rise in a


currency going forward, since the buildup of positions reflects


what has already happened, not the growing risk of a reversal


when the market is heavily positioned one way.


This is IMM players' first net short position since Nov.


20, 2001, when they held a net short position of only 286




It coincides with the euro's decline from $1.3470 as


dealers locked in profits and took it down as low as $1.3136 on


Dec. 10.


But that fall of only a few cents doesn't fit with such a


massive turnaround in positioning, analysts say. The limited


impact on the euro suggests there was huge euro buying from


other sources, most likely foreign central banks in Asia and


the Middle East.


"It appears that there has been some official reallocation


of reserves into euros which has allowed the speculative


community to reverse its position without causing serious


damage to the euro/dollar exchange rate," said Robert Sinche,


head of global currency strategy at Bank of America in New




Speculators also trimmed their net long positions in other


currencies, such as the yen and Swiss franc.


They cut their net long yen positions to 21,401 contracts


from 37,323 the previous week, and more than halved their net


long Swiss franc positions to 17,560 contracts.


But net long sterling positions were increased to 38,786


contracts, the highest since late 1999.




JAPANESE YEN (Contracts of 12,500,000 yen)


12/14/04 week 12/07/04 week


Long 33,636 50,795


Short 12,235 13,472


Net 21,401 37,323




EURO (Contracts of 125,000 euros)


12/14/04 week 12/07/04 week


Long 36,764 57,209


Short 51,306 33,095


Net -14,542 24,114




POUND STERLING (Contracts of 62,000 pounds sterling)


12/14/04 week 12/07/04 week


Long 41,235 39,467


Short 2,449 5,882


Net 38,786 33,585




SWISS FRANC (Contracts of 125,000 Swiss francs)


12/14/04 week 12/07/04 week


Long 34,319 40,393


Short 16,759 4,345


Net 17,560 36,048




CANADIAN DOLLAR (Contracts of 100,000 Canadian dollars)


12/14/04 week 12/07/04 week


Long 21,889 30,867


Short 12,812 12,497


Net 9,077 18,370




AUSTRALIAN DOLLAR (Contracts of 100,000 Aussie dollars)


12/14/04 week 12/07/04 week


Long 29,627 35,652


Short 66 1,409


Net 29,561 34,243




MEXICAN PESO (Contracts of 500,000 pesos)


12/14/04 week 12/07/04 week


Long 56,366 67,210


Short 6,256 11,219


Net 50,110 55,991








(Additional reporting by John Parry)


((Reporting by Jamie McGeever, editing by James Dalgleish;


Reuters Messaging: jamie.mcgeever.reuters.com@reuters.net;


email: jamie.mcgeever@reuters.com; Tel: 646 223-6316))






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  • 5 years later...



Short Euro has been the easiest and most obvious trade for a long time. A short covering rally will eventuate but will the money flow out of gold or the $US ? If it is the latter, it may propel gold to fresh highs.



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Hi Duster, a point of view exists that the US is really in a far worse situation than Europe--in that their sovereign debt is many times higher in percentages of their GDP than any other country has.


That point of view also suggests that eventually the market will turn its attention to the US debt situation, just as the market has had a look at Europe's--and having had a look thrown a wobbly.


However that point of view also acknowledges that at least EUROLAND has taken SOME hard decisions to rein in their debts, ie recently Greece.


All the US has ever done is throw petrol on the fire by printing money.


Therefore the theory goes that the EURO wont disappear--and will recover. At some point attention moves to the US--then the real balloon goes up.


So in answer: In many peoples opinions the next step is for the EURO to strengthen, the USD to weaken, and for Gold in USD to keep on rising, so in effect we go back to the weak USD/Strong USD Gold instead of the Strong USD/Strong USD Gold.


I would add that as the USD starts to weaken and the EURO starts to strengthen Oil in USD rises as does Gold in USD.

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flower: As long as the US$ is the only "world currency" and the one that keeps everything going, there is no way that the US$ can dramatically go down unless the total FINANCIAL SYSTEM collapses (which of course is also a possibility - but not a nice one to contemplate...). Hence, the US can keep printing as many US dollars as they like.

The only - way out in the future - new "really solid" currency might one day (in about 10 - 20 years) be the RMB.

Until then, the world will have to somehow "muddle through" with "worth-poor" currencies like the EURO and the US$...

We most certainly do live in a NOT stable world - financially / politically / ecologically.

All purely JIMHO, of course.


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W: No doubt what you suggest is accurate, but as you say it will take years to play out.


Meantime the sovereign debt watchers and the big boys who play with currencies will no doubt be looking at these two weekly chart right at this moment--IMO its only a matter of time, and a very short time, that these two charts reverse themselves--got gold and commodities in your trading/investment portfolio?



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Euro soars.


Was the headline I awoke to this morning.


Short Euro has been the easiest and most obvious trade for a long time. A short covering rally will eventuate but will the money flow out of gold or the $US ?


Looks like gold ............ for now!

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The question is, where does the "real" money flow to ?


That is providing it is real money doing the rounds, because if it isn't, we are in big trouble IMHO.


$US ......... no thanks


Euro............ maybe oversold but still not game.


GBP ............ you're kidding.


Gold ............ looking a little toppy atm


Oil ............ Now that's down, think I might have a go at that ! ....................... for now !

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Morning Duster--re the AUD overnight--and I can't put up a chart of this since my system is not functioning right now, but apparantly the dramatic drop in the AUD firstly caused by world events but then accentuated by rapid computer driven selling as stops were broken.


That seems to be the story around the world, starting in Germany where the government wants to reign in this computer driven nonsense trading in various items.


If one of the most stable currencies (the AUD) based around the most financially and democratically based economy can be manipulated thus by a tiny box and a screen, it's high time we ditched the whole ruddy lot--it's gone way past a joke.

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