Short-Covering Drives Euro Higher; Daily Trend Still Down

The Euro was strong most of the day following an almost week-long sell-off. News that the ZEW German investor confidence number was positive for the first time since July 2007 triggered the start of a short-covering rally.

The Euro was strong most of the day following an almost week-long sell-off. News that the ZEW German investor confidence number was positive for the first time since July 2007 triggered the start of a short-covering rally. This move was basically short traders lightening up positions that had been built on the notion of a lack of confidence in the European Central Bank.

Longer-term traders appear to be shying away from the long side of the Euro because it is unclear whether the European Central Bank will cut rates below 1%. Additionally, investors are not certain as to when and how the ECB will use quantitative easing to revive the Euro Zone economy.

Trader confidence is down and the ECB seems to be in tough position. If they don’t cut below 1% then traders will say they want more. If they leave rates unchanged then traders will say the ECB isn’t acting fast enough. Either way downside pressure should continue on the Euro.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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