While the euro has been gloriously soaring higher over the past nine days, to much pomp and circumstance, with the move now 3.2% on the week - the biggest 5 day gain since the beginning of the year, and European bureaucrats overeager to point out that there is no way the currency could be on the verge of implosion if it is in fact soaring, a far more quiet and stealthy move has occurred in the spread between French and German bunds, which just hit an all time record. Why is this important? Because as the chart below shows, the correlation between the two had been for all intents and purposes 1.000... until 5 days ago when it bexome -1.000. Which is a clear signal that the move in the EUR is now purely technical and on last fumes from the ongoing short squeeze long discussed on Zero Hedge (watch for the CFTC COT update at 3pm today for the plunge in net EUR short exposure); it is also a loud signal for a compression trade between the France-German bund spread and the EUR, and as such we encourage readers with a capacity to enact said compression trade to boldly go where no weak EUR short covering hands have dared go in the past 5 days.

Source:
Why The Euro Is Going Much Lower, Or The Mother Of All Compression Trades | ZeroHedge



Mike

Source:
Why The Euro Is Going Much Lower, Or The Mother Of All Compression Trades | ZeroHedge

Mike

Source:
Why The Euro Is Going Much Lower, Or The Mother Of All Compression Trades | ZeroHedge

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.

Let us wait for a trendline break first.

Or wait for price to reach the 50% level , stay on the train uptown before listening to whats "due" .

Fibo question:

Ericj took for his fib in the above chart the points A-Z (blue). That's logic (high/low). Medium term memory.
I take in this early phase the last significant high point B-Z (red). Short term memory.

IMO fibos have a certain relevance in currency trading because many traders do watch them. Let's take that as a fact as I do not want to start a discussion about fibo philosophy.

Are there any rules/guidance weather the majority of EURUSD traders tends to A-Z or B-Z at this specific point? Because the majority makes the rules and not my logic.

P.S.: Ericj's 50 is equal with my 61.8 what could make that level more significant as we both watch it..

Because the majority makes the rules and not my logic.