Long Overdue Short Covering In EUR Begins After 7 Consecutive Weeks Of Increasing Bearishness

Tyler Durden's picture

As predicted earlier today, following one of the most epic moves higher in the EURUSD in the span of 9 short days, driven without a shadow of doubt by the multi-year bearish sentiment toward the European currency, which in turn courtesy of the massive leverage inherent in the FX market, has been used as the catalyst to drive the latest risk on rally across all asset classes, the net bearish exposure in the EUR has finally relented, and after 7 straight weeks of increases in bearishness, hitting a whopping -82,697 net non-commercial contracts in the week ended October 4, the subsequent week finally saw a significant unwind in shorts, up to -73,795. And since there are 3 trading days between the end of the compilation period and Friday EOD, we are confident that by now the actual net bearish count is in the -60k's if not lower. Notable, however, is that while Euro short bets were unwound, bullish bets on the dollar continued to risk, hitting 46,886, a 7th consecutive weekly increase. While the margin covering of the EUR is already priced in, the other question is when the USD megabullishness will relent. For now, it hasn't which will likely be used by market makers to squeeze out highly correlated accounts into even more short covering across equities.