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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

 

Friday.

 

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

 

York.

 

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

 

week.

 

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

 

contracts.

 

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

 

York.

 

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...

Flower,

 

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.

 

Duster.

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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.

wasa

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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?

post-20731-1274153065.gif

post-20731-1274153076.gif

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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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