Speculative public is long 8 billion Euros — let the rout begin!

A decline in the $EURUSD could become a tsunami

Based on our calculations, the speculative public in the U.S. alone could be long as many as 8 billion Euros against the USD. This number could be double if European and Asian speculators are also on the same side of the market.

Our rough calculations are as follows:

• Globex futures ($G6E_F). The most recent CFTC COT data showed the large and small speculator long about 56,000 contracts of Euros against the US$. At 125,000 Euros per contract, the spec long position is about 7 billion Euros.
• $FXE is a long Euro ETF and represents a position equal to 315 million Euros. Most of this position is held by U.S. specs.
• We calculate that U.S. specs are long as much as 1 trillion Euros in the spot forex market. This calculation is too complex to review in this posting.
• Thus, the combined position of U.S. speculators is long about 8.3 billion Euros. If the global spec position in the Euro is double that of the U.S. spec position, then speculators could be long as many as 16 to 17 billion Euros.

The daily chart (below) is in the process of completing a 9-week symmetrical triangle top today. Should this top be confirmed by today’s close and should the forex pair have follow through then an absolute rout could occur.

The $EURUSD has an initial target (pending a closing price completion of the triangle) of 1.3130 with a further target of the January low at 1.2907.

Markets: $EURUSD, $FXE, $UUP, $UDN, $G6E_F