Back at the end of November, I wrote about the Euro Dollar and how the Commitment of Traders report showed that large speculators had made a major shift from net long 300,000 contracts to net short 800,000 contracts.
That shift happened from mid-August through mid-November.
During the last six weeks, this extreme level of bearishness has subsided a little, however it appears the large speculators have turned their attention to the EuroFX now.
The Euro Dollar is the physical currency of the eurozone. The EuroFX is the exchange rates between the Euro and other currencies.
The large speculators have now built the biggest bearish position on the EuroFX in the past year with almost 128,000 contracts net short. Before the recent trend, the biggest short position of the past year was just over 80,000 contracts.
From a contrarian viewpoint, this could be a good time to invest in the euro.
If you are not a currency trader but would like to benefit if the euro rallies, the Currency Shares Euro Trust (FXE) is an ETF that moves up when the euro moves higher and vice versa.
The FXE is currently trading just over $127 and is oversold based on the 10-week Relative Strength Index (RSI) and the weekly slow stochastic readings.
The RSI is the lowest it has been since June 2010 and the slow stochastic readings are the lowest they have ever been since the fund launched in December 2005.
There is also technical support at the $125 level for the FXE as a double bottom formed at this level in October 2008 and February 2009.
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