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Euro Dollar Short Squeeze

by Rafael Rosa on November 12, 2010

funny dog pictures no squeeze me Euro Dollar Short Squeeze

We all knew it was coming, just not when. It definitely took a while, but the Euro short squeeze made its debut during the Friday European session.

After reaching the 1.3570s, the pair snapped back to the 1.3720s. The claim is that an Irish rescue rumor started by some think-tank created the chaos. While the rumor threw gasoline on the fire, it must be noted that the reversal on the Euro started at 3 AM Eastern. The “rumor pop” came in at the 5 AM handle. Thus, some of the upside has to be attributed to the bargain hunters.

The key factor will be whether the Euro-Dollar breaks above the 1.3730s level. See the video from 6 AM below:

The second thing to keep in mind is investor psychology. The market has been in a downtrend; however, a minor rumor was enough to get the Euro up and running. The price action says a few things about the market players in the Euro.

The bears are seeing that they are vulnerable right now and will bailout in a heartbeat. The Bulls, on the other hand, are ready to jump in on any signs of relief in the Irish situation. The bulls want to start talking U.S. QE again.

And today is Friday. This means that over the weekend you  run the risk of having some politician or something coming in and saying that the Ireland situation is resolved (truth or not). Investors know that any positive rumor positive will be enough to snap the Euro back.

Going into the U.S. session, it’s important to note that traders may be thinking about closing their shorts before the weekend. Why risk it over the weekend? Overall, this may either buoy the market or even create a rally. Shorts, be on the lookout.

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Technorati Tags: eur/usd, euro dollar, euro short squeeze, ireland bailout, ireland rescue package, irish bailout, short squeeze, support resistance, us dollar

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