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EUR Shorts Hit New Record

Tyler Durden's picture





 

Last week, when we reported on the then brand new record number of EUR non-commercial short contracts as reported by the CFTC, we said: "with such a massive surge in shorts in a short period of time, this means that the likelihood of major short squeezes is substantial on even the most innocuous of news, such as a G8 summit which promises much but delivers nothing, or China once again saying it will gladly focus on growth (as opposed to what? non-growth?), or some DieBold-inspired leadership change in the Greek pro/anti-bailout polls. Our advice to FX trading readers: be very careful with EURUSD stops: it is very likely that in their pursuit of short covering squeezes, (BIS) algos will take the pair substantially into the offer-side stop limit buffer just to force short hands out, which in turn may initiate short-term covering ramps." As of last Friday, the record number of net short contracts (-173.9K), just rose to a new all time high of -195.4K. The result: something as worthless and meaningless as uber-volatile Greek political polls (which had Syriza with a 4 point lead last Friday, which somehow dissolved and is now in second place about 24 hours later), was enough to send the EUR higher nearly by 100 pips overnight. Obviously, with ever more record shorts in the currency, expect the desperate continent to come up with nothing but more flashing red headlines in attempts to spook weak hands and incite even more very transitory short covering.

Below is the random number generator on which the fate of capital markets rests:

 


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Mon, 05/28/2012 - 09:10 | Link to Comment doomandbloom
doomandbloom's picture

time to buy..

Mon, 05/28/2012 - 09:12 | Link to Comment junkyardjack
junkyardjack's picture

Yup, start looking at stocks that are moving up.  There will be a temp pull up again

Mon, 05/28/2012 - 09:18 | Link to Comment Comay Mierda
Comay Mierda's picture

cue face-ripping short squeeze in 3....2....1....

1.2600 will be the trigger

 

Mon, 05/28/2012 - 09:22 | Link to Comment Colombian Gringo
Colombian Gringo's picture

Hey Bennie Bernank, fuck off!

Mon, 05/28/2012 - 09:43 | Link to Comment The Monkey
The Monkey's picture

Not all sentiment trades are good ones. Sometimes an extreme in short interest can also be burned off by much lower prices on a downdraft. That said, I'm waiting for a bounce. Just saying.

Mon, 05/28/2012 - 09:54 | Link to Comment junkyardjack
junkyardjack's picture

Very true, the S&P has been sitting sideways over the past couple of days, its better to hold whichever way you are positioned right now and wait for it to break one way or the other.  It seems like its really a 50-50 game right now, could go up on a short squeeze or crash on more bad news, its a traders market 

Mon, 05/28/2012 - 10:16 | Link to Comment The Monkey
The Monkey's picture

Why would you hold if it's 50/50? 100% cash. I wouldn't even own treasuries ahead of all this.

Magnitude from these levels is skewed in favor of a short, sentiment in favor of a long. Let's burn off the sentiment issue, even if it means a lost opportunity, and reset before taking the next position.

Mon, 05/28/2012 - 09:09 | Link to Comment junkyardjack
junkyardjack's picture

Just what is needed to trigger another January type rally. Market has been sitting sideways, should crash but the shorts getting squeezed out by the algos will bring it back up to 1350+ before it heads back violently to 1000-

Mon, 05/28/2012 - 12:59 | Link to Comment Element
Element's picture

Thought Mark Faber just said new highs were out ... oh well, ... wheeeee!

Mon, 05/28/2012 - 09:14 | Link to Comment SilverIsKing
SilverIsKing's picture

The massive EUR long position held by the commercials relative to the opposite shorts by the large specs does indicate huge squeeze ahead although could this massive build up longs on the part of the commercials be the result of them propping up the EUR on behalf of certain central banks?

Either way, caution is warranted here for traders on the short side.

Mon, 05/28/2012 - 09:18 | Link to Comment Tyler Durden
Tyler Durden's picture

Commercials are irrelevant as they are merely the other side of the spec bet.

Mon, 05/28/2012 - 09:14 | Link to Comment Bugman82
Bugman82's picture

Don't get caught short in mid June.  Greece election polls are swinging back to the pro-bailout parties.

Mon, 05/28/2012 - 09:25 | Link to Comment MeanReversion
MeanReversion's picture

All these polls seem to be within the margin of error given that the sample sizes seem to be 1000-1200 (correct me if I'm wrong), which makes roughly for a +/- 3% margin of error, so in essence you have a near statistical tie based on existing polling. It seems to me the markets today are OVERreacting positively anticipating an optimistic scenario of a pro-bailout coalition being favored by the Greek public based on these polls.

More importantly, I understand these polls exclude undecideds as well as those who refuse to answer. How do those undecideds tend to vote in Greece? In the U.S., undecideds tend to vote for the challenger the majority of the time.

Further, do we know anything about polling methodologies? Are these all landline based polls, if so, that would seem to generally favor older voters who are likely to break conservative (as it does in the U.S.)?

The issue I see is that the polls were off the mark prior to the May 6th election, and the question is why. Could Syriza be underpolling again? If there is a proposed debate just prior to the election my guess is that may be a decisive factor and all these early polls are interesting but not reflective of how things will turn out.  

Finally, note that June 3rd will be the last date polling companies will be allowed to poll in Greece, anything can happen in 2 weeks.

Mon, 05/28/2012 - 09:50 | Link to Comment The Monkey
The Monkey's picture

If we can get some support for the Euro on good news, then we'll have another low risk opportunity to short. I would love to see S&P 1380 again. Seems impossible now, but then again, it always does.

Mon, 05/28/2012 - 11:34 | Link to Comment Bugman82
Bugman82's picture

Current polls aren't what really matter.  It is the trend that matters and the trend shows a strong swing towards bailout parties.  Just after the election there was much much stronger suppor for anti-bailout partis.

Mon, 05/28/2012 - 09:25 | Link to Comment THX 1178
THX 1178's picture

The polls may just be a ruse to get you long and to get more money into the market. Who knows If they are true or not.

Mon, 05/28/2012 - 10:02 | Link to Comment The Monkey
The Monkey's picture

They show Greek sentiment vacilating. Even if New Democracy wins, Greece does not necessarily get a coalition government. The results were a surprise last time around, they will likely be again.

Mid-June may be a great time to be short, but it's a high risk trade. I definitely wouldn't be long, which tells me the path of least resistance the next couple of weeks is lower prices. Could be a cascade of selling pressure coming up since we're so close to support.

Staying on the sidelines. This will be going on for months so there is no rush.

Mon, 05/28/2012 - 11:00 | Link to Comment THX 1178
THX 1178's picture

I don't think it will last months... not with bank runs already present. I mean... I give them credit for extending it this long, but I just don't see months left in the game.

Mon, 05/28/2012 - 11:42 | Link to Comment The Monkey
The Monkey's picture

Then short you must. I'll prefer to take the post sell-off countertrend trade unless higher prices are in the cards, in which case I'll short again.

Mon, 05/28/2012 - 09:32 | Link to Comment Quinvarius
Quinvarius's picture

It is going to make me laugh when the CBs run the EUR back to the 1.50 top of the trading range like they always do.  People still don't get it.  There is no FOREX "market".  The exchange rates are set by central banks as policy.  The EUR has been held in a trading range for 8 years. The EUR rate is chosen, not discovered.  Everyone wants to play like they are George Soros breaking the Pound.  Well, George Soros didn't break the Pound.  George Soros had inside information and inside influence into the process of a coming Pound devaluation by the British Government.  All he did was play off inside information of where the government was going to set the exchange rate. 

Mon, 05/28/2012 - 09:48 | Link to Comment TWSceptic
TWSceptic's picture

The CB can still fail, CB policy is not as straightforward in the EU as it is in the US.

Mon, 05/28/2012 - 09:56 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

That is funny. Mostly because it's true.

Still, people like the idea of 'fundamentals'. A warm concept.

Mon, 05/28/2012 - 09:27 | Link to Comment Oso
Oso's picture

Just for clarification, I am fairly certain this data is as-of 05/15.  The actual figure, per CFTC COT report as-of 5/22, looks to be almost 216k contracts  http://www.cftc.gov/dea/options/financial_lof.htm 

Mon, 05/28/2012 - 09:49 | Link to Comment magpie
magpie's picture

Seeing that the cold civil war is slowly turning hot in Germany, i might not be averse to a little bank walk/run...

Mon, 05/28/2012 - 10:08 | Link to Comment Bastiat009
Bastiat009's picture

Even when the market is closed, gold follows the euro tick by tick.

For those who can't really read, I never said it made sense, I am just saying that gold is traded like the euro against the US$, as though gold was in danger of collapsing.

Mon, 05/28/2012 - 10:45 | Link to Comment Treason Season
Treason Season's picture

Stop with the golden showers troll.

2003            325 Eurinations

2012        1,255 Eurinations  

Mon, 05/28/2012 - 11:40 | Link to Comment michaelsmith_9
michaelsmith_9's picture

I very much agree that we could see a short squeeze higher for the EURUSD and some USD weakness in the short-term, but that will only offer a tremendous opportunity to be long the USD for the weeks ahead.  The USD is showing some big signs of being very bullish.  http://bit.ly/KzX6dj  www.marketoverflow.com

Mon, 05/28/2012 - 12:24 | Link to Comment DUNTHAT
DUNTHAT's picture

You can get a clear picture here ---

 

https://docs.google.com/open?id=0B16Nxp5pgJBzd3FWN1psNlhoZ2s

Mon, 05/28/2012 - 12:39 | Link to Comment strongband
strongband's picture

sorry, but how the hell is any of this actually recorded??? how do we know to what accuracy these shorts are!?

Mon, 05/28/2012 - 14:02 | Link to Comment Oso
Oso's picture

uh....Im not sure your tone really helps you out all that much.  www.lmgtfy.com  or...

 http://www.cftc.gov/dea/options/financial_lof.htm 


Mon, 05/28/2012 - 15:04 | Link to Comment strongband
strongband's picture

sorry,

thanks - but how is this data collected. Are FX brokers under 'leveraged funds'?

Wed, 05/30/2012 - 07:58 | Link to Comment boa74520
boa74520's picture

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