Watch The COT for Euro Traders
Posted on May 7, 2008
Filed Under EUR/USD |
The euro’s retracement from last week’s low of 1.5360 against the US dollar is only to be expected given the extent and speed to which the euro dollar fell. Learning to trade the counter-trend is an important skill and one which traders need to understand and acquire in order to maximise their trading profits. The forex market is like a carousel and traders just need to know when to jump on and off. Needless to say this is easier said than done as successful trading also depends on the ability to blend the technical and fundamental indicator data coming out of the market on a minute by minute basis.
In my last post I posed the question whether the euro was about to turn and that it would do so because of political pressure. Well that pressure must have worked because the CFTC numbers (COT data) of Friday showed that the previous Tuesday’s speculative accounts had reversed to a net euro short position of -21315 from previous week’s +18907 long contracts- a staggering reversal and apparently the largest speculative euro short position since the currency was launched!! (Net short in this case is the difference between long and short positions of non commercial traders - data from cftc).
Not surprisingly this Thursday’s interest rate statement from the ECB will be scrutinized even more keenly as the market listens for clues regarding future monetary policy. The statement is given at a press conference and covers in detail the factors that affected the most recent interest rate decisions as well as the overall economic outlook and inflation for the eurozone. Traders can expect heavy market volatility.
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