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CFTC Euro Net Short Contracts Surge By 10% Sequentially, Hit Absolute Record Of -113,890, Just Begging For Squeeze

Tyler Durden's picture


The most recent CFTC Commitment of Traders report is out, and at least as pertains to the EURUSD, it is a doozy. After hitting record after record in net short exposure, the Euro net non-commercial contracts have surged by 10% week-over-week, and represent a fifth consecutive weekly bet on the decline of the Euro, to -113,890 contracts. This is an all time record, as virtually all speculators are betting against the Euro. On the other hand, a reversal here for whatever reason would incite the mother of all short squeezes and likely push the EUR to well over 1.60 on a catalytic event. The only question is whether such a catalytic event can even possibly be conceived. We'll leave that one to the black swan hunters among you.


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Fri, 05/14/2010 - 16:22 | 352604 dark pools of soros
dark pools of soros's picture

how about "Mermaids lead wayward Greek fisherman to massive buried stash of gold???"

Fri, 05/14/2010 - 19:30 | 352942 dnarby
dnarby's picture


Seriously though, when this squeeze happens it could present a good buying opportunity for gold.

Sat, 05/15/2010 - 17:30 | 353860 whatsinaname
whatsinaname's picture

They could but they would have to take a train or swim across.

Flights shut again tomorrow because of volcanic ash. Summer tourism bust ?

Fri, 05/14/2010 - 16:23 | 352607 Invisible Hand
Invisible Hand's picture

Never hold a short position over the weekend and stop them out quickly.  A lesson I learned the hard way.  Quick in, make a little money, get out.  If I've taken a little profit and covered: result, happiness.  If I get greedy and hold the short: result, tears. The governments are stupid but they are out to get you, Mister Evil Speculator, so be nimble.

Fri, 05/14/2010 - 16:52 | 352667 RichardENixon
RichardENixon's picture

How true. I forgot to close out an aud/usd short last Friday night and got smoked.

Fri, 05/14/2010 - 16:24 | 352608 Mitchman
Mitchman's picture

Hre come the FED, here come the FEd, here come the Fed...

Fri, 05/14/2010 - 16:26 | 352611 Sudden Debt
Sudden Debt's picture

You know Tyler...

When people are having a party... you shouldn't spoil the fun.

What your saying is like talking about the crabs at a gangbang party. Just not done man!

Fri, 05/14/2010 - 16:26 | 352612 sysin3
sysin3's picture

Maybe they should rename it  " zeuro " .

Fri, 05/14/2010 - 16:28 | 352616 No More Bubbles
No More Bubbles's picture

You only get a squeeze if they cover.  Eventually, the shorts win if they just hold strong........

Fri, 05/14/2010 - 16:47 | 352652 thesapein
thesapein's picture

and then the commercials going long will be taken to cleaners, right? Oh, that would be glorious.

Sat, 05/15/2010 - 05:21 | 353406 Pelosis Usless Brain
Pelosis Usless Brain's picture

True. There are reasons for being short other than specualtion.


Fri, 05/14/2010 - 16:31 | 352621 Leo Kolivakis
Leo Kolivakis's picture

When Greece receives funds next week to meet its bond payments, the Euro will rally like crazy (mostly short covering).

Fri, 05/14/2010 - 16:36 | 352628 hedgeless_horseman
hedgeless_horseman's picture

Czech's in the mail?  My God, Leo, your medicine!  Don't forget to take your medicine.  Remember what happened last time? 

Fri, 05/14/2010 - 16:50 | 352660 Leo Kolivakis
Leo Kolivakis's picture

See Ned's comment below.

Fri, 05/14/2010 - 16:38 | 352631 Ned Zeppelin
Ned Zeppelin's picture

Leo's right  - due May 19, and the funds will show up. But cause for a Euro rally? Possibly, as a demonstration of the reality of the EuroTARP.

That assumes no big explosions over the weekend, like Sunday night. Anything could happen, but the most likely is some ramped up response to slow the descent of the Euro due to its impact on EuroSovDebt.

So I agree - holding the short over the weekend may prove painful come Monday.

Fri, 05/14/2010 - 16:52 | 352666 Leo Kolivakis
Leo Kolivakis's picture

Thanks Ned, I expect some short covering rally in the Euro, then it will proceed towards parity.

Fri, 05/14/2010 - 18:55 | 352886 Double down
Double down's picture

"Well played Leo, your journalistic professionalism shows through, and now over to Maria Bartiromo for the weather"

Fri, 05/14/2010 - 17:54 | 352773 andrewunknown
andrewunknown's picture

What is it about the 05/19 disbursement that would induce the EUR to rally?  I'm not so presumptuous as to claim it couldn't happen, but fail to recognize how this will coax some latent source of demand out of the shadows.  As you said, the funds will show up.  If anything, I think the response would be net negative: at least from where I'm sitting, May 19 is the tangible beginning of the unfolding collective realization that the EU has indeed started down a very dark road. 

Sat, 05/15/2010 - 06:28 | 353430 Tart
Tart's picture

May 19th payment

Fri, 05/14/2010 - 16:32 | 352622 nicktd
nicktd's picture

easy.... berneke anounces our facists brothers in europe need help to monetize PIIGS bonds with dollar toliet paper!!

Fri, 05/14/2010 - 16:38 | 352630 Sudden Debt
Sudden Debt's picture

facists?... you know... reading a book once a while never killed anybody. Maybe you should try that once, and I'm not talking about the manual of the microwave.


Fri, 05/14/2010 - 17:12 | 352713 tmosley
tmosley's picture

Reading a book isn't going to help you learn to spell "fascist".  

And misspelling a word is not indicative of intelligence, you jackass.

Fri, 05/14/2010 - 17:24 | 352732 Sudden Debt
Sudden Debt's picture

Your a idiot to think fascists still exist in Europe MORON!

By even responding, you prove to be a lowlife Racist Redneck inbreed Motherfucker.


Fri, 05/14/2010 - 20:55 | 353011 tmosley
tmosley's picture

I possess an idiot?  Methinks you should attend to your own mind before pointing out the deficiencies you perceive in the minds of others.


Fri, 05/14/2010 - 21:26 | 353052 DoChenRollingBearing
DoChenRollingBearing's picture

I believe Sudden Debt is FROM Europe.  And so may be posting in his (her) non-native language.

Misunderstandings are common when speaking a language other than your own.  You should see the looks I get sometimes in Europe when I speak my badly fractured Italian or French.

So lighten up on Sudden Debt, whose observations from the European Theatre I find of great value.

Disclosure: I did not run into any fascists in our last trip to Italy.

Fri, 05/14/2010 - 21:39 | 353069 tmosley
tmosley's picture

I'm not quite sure why I am the one that needs to lighten up.  He is the one shooting his mouth off acting like a child that had his lolly taken from him.

If he doesn't understand what a fascist is, that's his problem.  This last bailout has proved definitively that Europe is run by those who seek to merge governent and corporate power, the very definition of fascism.  They might not be slaughtering Jews this time around (yet), but their economic and social policies are the same.

Sat, 05/15/2010 - 07:57 | 353464 Sudden Debt
Sudden Debt's picture

Sorry for the insults. He's right.

The word fascist comes pretty hard here, same thing for Nazi's. By saying that these idiologies still exist as a average society comes pretty hard if you know that we where actually supressed by them.

It would be almost the same if we would be calling Americans Communists.

We both are western people, and shouldn't call each other names. Our two societies are the best on this planet. Some thing are better in your country, some things are better in mine. And for the moment, both are countries are in a mess. 

So: sorry for the name calling Mosley, I shouldn't have done that.

Sat, 05/15/2010 - 14:38 | 353746 tmosley
tmosley's picture

Thank you.

To be fair, America is more fascist than Europe.  The entirety of the western world has been usurped by these people.  It's sickening.

Sat, 05/15/2010 - 23:34 | 354268 nicktd
nicktd's picture

Wow! I generated my first controversial thread!

And why people make fun of microwave oven manuals i have no idea. They are a better read than FRNYB paper on currency swap program. Borring!


Sat, 05/15/2010 - 15:34 | 353776 desgust
desgust's picture

The Governments are FASCIST, not the people. Yes, I'm European and I don't want an euro in Germany! No, I don't respect Merkel. Yes, last year Americans loved Merkel! She's a neo-con, scum, friend of Bush and globalists. And yes, we hate the EU and we reject it but we have no guns like you do. BTW your government is also fascist and you have GUNS!


Sat, 05/15/2010 - 19:03 | 353977 FreeStateYank
FreeStateYank's picture

And Europeans loved Zero. Just goes to show how easy it is to fool people. As a yank, I've watched the Feds periodically make noises about guns. Here, that just sends a wind up the britches of the public and they go out and buy more guns and ammo. It's been a standoff.


Lately, gun rulings appear to be tilting to those who support the 2nd Amendment, thankfully. Bit surprised clever Europeans haven't just made their own. Besides defense, helps to put food on the table. Faster and more effective than snares!

Fri, 05/14/2010 - 16:39 | 352634 Mitchman
Mitchman's picture

On a serious note, I have a query:  If they sqeeze the shorts, aren't TPTB crushing the very same banks they just spent $1 trillion bailing out?

Fri, 05/14/2010 - 16:40 | 352638 Sudden Debt
Sudden Debt's picture

how do you mean?

Fri, 05/14/2010 - 16:48 | 352654 Mitchman
Mitchman's picture

I am assuming that the guys holding the short positions are the TBTF banks and that in a rally situation where the PTB go and buy up euros in the market to firm the price the shorts are going to have to cover and lose a bunch of money in the process.  I am obviously a rookie at this and just trying to uindersatnd.  Thanks for the help.

Fri, 05/14/2010 - 16:53 | 352669 buzzsaw99
buzzsaw99's picture

You aren't wrong. [/double negative]

Fri, 05/14/2010 - 16:56 | 352675 Mitchman
Mitchman's picture

I love it when people say "I don't disagree with you".  :-)

Fri, 05/14/2010 - 21:12 | 353036 IE
IE's picture

That's just nuance.  It does have a different meaning than "I agree with you".  With the double negative, there is an implied, "but..." ... or some other caveat or context.

Fri, 05/14/2010 - 23:34 | 353195 bulldung
bulldung's picture

Thank you hedge grammarian.

Fri, 05/14/2010 - 17:36 | 352747 Greater Fool
Greater Fool's picture

The question is why the banks are short. If they're hedging USD liabilities to keep from bleeding to death out that side of their balance sheets, then they can't really be "squeezed"; even if the EUR turns around, they don't feel it in PL terms.

I also am no FX pro, so I suppose it could be that a lot of these positions are speculative froth, and you would get a squeeze if the currency turns around. But the market is huge, and extremely large amounts of it are real-money hedging and government monetary policy, which will not change course as quickly as speculators will.

Fri, 05/14/2010 - 17:43 | 352754 thesapein
thesapein's picture

It was a trick question, by accident maybe, wasn't it? Non-commercials are mostly shorting the Euro right now. Commercials are long, going down with the ship.

Fri, 05/14/2010 - 18:57 | 352895 Mitchman
Mitchman's picture

Dear All,

Not a trick question.  Just asking out of overly demonstrated ignorance.  I love this blog.  It is great to read the musings of such wonderful minds.  Thank you all very much.  I will stay close to the Blackberry waiting for that one special news bulletin.  It is guaranteed to be interesting.  Thanks very much again.

Fri, 05/14/2010 - 17:37 | 352749 thesapein
thesapein's picture

I'm only attempting a response so that I can be corrected if wrong.

TBTF banks you are referring to are typically considered part of the commercials. Tyler's graph shows the short positions for non-commercials. Thus, TBTF would be represented by a mirror curve showing the commercial longs. So I think you got it kind of backwards, no?



Fri, 05/14/2010 - 17:46 | 352760 Sudden Debt
Sudden Debt's picture

I don't think European banks would bet against the Euro knowing they all got bailed out.

The EU would fry them if that ever came out.

Same for the dollar. What if the dollar would drop 20% because citibank or bank of america shorted it to death? The gov. would break them up as a pressent.

I think...

Fri, 05/14/2010 - 21:09 | 353032 IE
IE's picture

I believe Tyler posted an article saying that is exactly what the European banks are doing.  The premise is moral hazard.

Fri, 05/14/2010 - 17:06 | 352673 Panafrican Funk...
Panafrican Funktron Robot's picture

Depends on the net change in currency and bond holdings.

I have a viewpoint that Monday is actually going to see another substantial leg down, possibly even breaking 1.20.  The incentives and ammo to break through a squeeze are there.  I ultimately see this even breaking through parity.  Everyone will run around like chickens with their heads cut off at this "unprecedented" event (that happened not even a decade ago). 


Fri, 05/14/2010 - 16:46 | 352650 Abundance
Abundance's picture

Go long the Euro.

Fri, 05/14/2010 - 17:47 | 352764 Sudden Debt
Sudden Debt's picture

Not before it gets back above 1.25

Fri, 05/14/2010 - 16:53 | 352670 Headbanger
Headbanger's picture

And what does that mean for gold and silver Tyler? Would gold/silver plunge with a rebounding Euro or would the falling dollar prevent it?

Fri, 05/14/2010 - 17:04 | 352697 Panafrican Funk...
Panafrican Funktron Robot's picture

As far as commodities charting, gold and silver are going to do whatever JPM wants them to do.  Fortunately, physical gold is a good buy at any price.

Fri, 05/14/2010 - 18:30 | 352843 Janice
Janice's picture

Not Tyler, but gold was about $1,000 9/2009....before the Euro crisis. 

Fri, 05/14/2010 - 17:02 | 352688 Nolsgrad
Nolsgrad's picture

go look back further, nearly $15billion were short the Euro back in the Q1-Q2 2008, granted it's approaching $25billion this time. 

Fri, 05/14/2010 - 17:02 | 352690 pragmatic hobo
pragmatic hobo's picture

"The only question is whether such a catalytic event can even possibly be conceived."


If on Sunday Greece "voluntarily" decides to opt out of EC and promise they will not default on their debt ...

Fri, 05/14/2010 - 17:30 | 352738 Ned Zeppelin
Ned Zeppelin's picture

Or Merkel says f - - - off France and announces the reinstatement of the DM.

Fri, 05/14/2010 - 17:21 | 352727 Flounder
Flounder's picture

How about breaking 1.20 next week?  I'd believe that before a squeeze up.

"Alan Ruskin, head of foreign-exchange strategy at RBS Securities, is revising his forecast for the EUR/USD to 1.14 by the middle of next year. However, a "hard landing" from the European debt crisis would put euro-to-dollar parity on the table. Mr. Ruskin adds that the key 1.1650 level for the currency pair may be tested by year's end."

Fri, 05/14/2010 - 17:39 | 352750 contrabandista13
contrabandista13's picture

"......We'll leave that one to the black swan hunters among you....."


And I'll see if I can get some Exlax in their Kool Aid on Monday morning.....




Fri, 05/14/2010 - 17:42 | 352752 andrewunknown
andrewunknown's picture

1.60 on a "catalytic event"?  What does the EU, IMF or ECB have left up their sleeves to incite that kind of reaction with that magnitude of follow-through?  If the break below 1.2450 holds, I see little that recommends itself to a throwback of any significance, other than a simple return move to that level before heading as much as 600 pips lower in very short order.   

Sat, 05/15/2010 - 05:36 | 353413 GBruenetti
GBruenetti's picture

What does the EU, IMF or ECB have left up their sleeves to incite that kind of reaction with that magnitude of follow-through?

An unlimited FX swap line with the Fed?

Say you are the ECB and want to teach that guys a lesson. You get several megatons of $$$ from the fed and start buying €€€. Sooner or later the shorts need to cover and drive the € even higher. When you are satisfied with the level of net positions left, you sell the €€€ again, bringing the price down to the previous level minus the missing shorts. Thus you made a healthy profit payed for by the shorters.

Why isn't that happening right now?


Sat, 05/15/2010 - 05:54 | 353419 primefool
primefool's picture

Exactly. Why have they not done it yet? Because in curency manipulation as in stand-up-comedy -  timing is everything! Got to get everyone firmly on one side of the boat. This may be brilliant timing if theu do it next week. Why?

because - after announcing Le Bazzoka evryone was expecting at least a short term bounce in the Euro. When that did'nt happen - everyone fely doubly emboldened to push their short bets to the max. So - you let them get way out on the limb.

Next week - saw off the limb.

Fri, 05/14/2010 - 18:03 | 352781 carbonmutant
carbonmutant's picture

Mish thinks the coming "short squeeze" on the EURO is gonna create a huge air pocket underneath... like what happened with Fannie Mae and financials.

"Once the shorts are driven out these shares will plunge. And who wants to buy a bond or provide capital knowing or even thinking share prices were artificially inflated."

Fri, 05/14/2010 - 18:52 | 352880 kengland
kengland's picture

Greek funding is soooooo yesterdays news brother. Germany and France have already made that a long ago story.

How about the Sterling? All of EUROPA is THRASHED. Lopsided trade or not, the reality of the situation is what it is and if continues to show fracture the trade is good.

Fri, 05/14/2010 - 18:57 | 352896 gecko_x2
gecko_x2's picture

no, it's fat swan and black finger, the other way is the lie.

Sun, 05/16/2010 - 12:05 | 354691 Auroch
Auroch's picture

spffftt ;) LOL (wipes coffee off screen)..

Fri, 05/14/2010 - 19:12 | 352919 Mitchman
Mitchman's picture

As always, Mr. Evans-Pritchard nails it on the head:

Fri, 05/14/2010 - 19:44 | 352959 London Dude Trader
London Dude Trader's picture

I don't buy this EUR mother of all short squeezes story. First of all the FX market is gigantic, and the EUR CME positions are only a fraction of the overall EUR FX market. Additionally, daily volume in EUR futures has been consistently over 300K contracts on Globex (it was over 500K on Thursday May 6.) So the outstanding commercial net short time to cover is what, half a day or less?!?

For disclosure, I don't hold any FX positions.


Fri, 05/14/2010 - 20:06 | 352980 Freebird
Freebird's picture

Well I do, not just cos I am making on the forward but there is something about being one of the Wolfpack..ha, We will see 1.20 or thereabouts next week imho.

Fri, 05/14/2010 - 20:10 | 352983 London Dude Trader
London Dude Trader's picture

You don't understand, we're saying the same thing. 

Sat, 05/15/2010 - 17:00 | 353829 Freebird
Freebird's picture

I do and we do agree Dude.

Respect your view.

Fri, 05/14/2010 - 20:58 | 353013 e_goldstein
e_goldstein's picture

There has never been a better time to get out of the markets and into 00 buckshot and canned food.

Sat, 05/15/2010 - 02:08 | 353336 JonTurk
JonTurk's picture

when eur jumps gold wil fall -- thats for sure..

tyler is just showing irony on this note but his major paradox is the overdependence on usd, given all the comments about the united states of bubbles (which i agree)...

fat finger is just making the waltz routine whichs been on since apr 09----

take care,



Sun, 05/16/2010 - 09:41 | 354531 Hephasteus
Hephasteus's picture

"when eur jumps gold wil fall -- thats for sure.."

Ya that would totally happen in a market that wasn't completely controlled by lying criminals. When gold dollar and eur all rise at the same time you need to learn something. When is a bullshit swap pretending to be a real swap not affecting the swap spread.

Sat, 05/15/2010 - 02:15 | 353342 romario
romario's picture

My technical analysis show that 1,26 is the most important point of the Euro right now.

Below it, it's junk. But it's a good stop also, for short covering... I'd close my short (if I had one) on the first daily close above 1,26.

I'm currently very heavy on S&P futures contracts, sell position too... I don't think markets will go up monday, but. They did go up last monday.

Sat, 05/15/2010 - 03:20 | 353379 merehuman
merehuman's picture

mondays are always up in defiance of all sensibility and laws of nature.

Sat, 05/15/2010 - 02:52 | 353363 Grand Supercycle
Grand Supercycle's picture


The March 2009 bear market rally ended last week.

Sat, 05/15/2010 - 11:31 | 353596 cocoablini
cocoablini's picture

Ya Think??

Sat, 05/15/2010 - 10:25 | 353556 youngandhealthy
youngandhealthy's picture

The FED-CB FX swap made it possible for e.g. PIMCO (among others) to dump their Euro assets (Greece and spanish Bonds) and get back to the USD without being "totally" hammered. Thats the purpose of the FX swap people....

Liquidity yes....but not for the reason most people believe.

Sat, 05/15/2010 - 11:36 | 353599 cocoablini
cocoablini's picture

This is a gift to the German Economy and anyone over indebted in Europe. It's just a circular currency devaluation attempt-now its Europe's turn.

Europe exports are harmed by this facade of the strong Euro. The carrytrade from dollars/yen to Euros is unwinding, evening out the currency imbalances.

Germany is cheering the euro crash-it will propel their exports forward. For Greece, what they owe has less real value. For Ben Bernanke, the outbreak of the dollar becoming the sounder currency is a massive nightmare for him...

Sun, 05/16/2010 - 07:54 | 354444 Grand Supercycle
Grand Supercycle's picture


My bullish USD warnings since 2009 on weekly and monthly charts have not changed and further USD strength and thus EURO weakness is still expected, so USD rally and EURO downtrend will continue.

Sun, 06/05/2011 - 08:06 | 1340860 sun1
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