Euro Bears Get Whipsawed

Selling pressure in the euro has been relentless over the past year and the currency has fallen just over 19% in value. Without surprise, pessimism toward the euro has been building.

Look at these recent mainstream headlines:

Delight or Dread as Euro Falls – New York Times (Mar. 11, 2015)
Euro Sinks to 12-year Low – The Guardian (Mar.11, 2015)
How Much Lower Can the Euro Fall? – Institutional Investor (Mar.19, 2015)

The one thing all these headlines and pundits have in common is that they are universally bearish on Europe’s currency. And just as the pessimism toward the euro (NYSEARCA:EUO) continued to accelerate, we did the exact opposite of Main Street, Wall Street and the media. How?

FXE 5.20.15

On Feb. 18, we warned our readers that a relief rally in the euro (NYSEARCA:FXE) was coming and to be ready.

We reiterated this view via our Technical Forecast on Mar. 29, 2015 we wrote:

“The Euro hedgers (the smart money) have now set a record in their long Euro positions. This has occurred even as the Euro has rallied 5% off its bottom. Such positioning suggests the Euro continues higher for a sizable period of time as the smart money uses the upcoming rally to close their historically long positions. This suggests a 1-3 month rally in the Euro is very possible just from a mean reversion perspective.”

How did it turn out?

Since our March alert, the Euro has rallied 1.84% while the leveraged euro ETF (NYSEARCA:ULE) has surged almost 3.5%. Meanwhile, euro short traders have lost money.

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