Euro Plunges On Cypriot Depositor Hit

Euro is dumped across the board after as the Euro debt crisis morphed into a hit on bank depositors. The €10 bn bailout would be financed by a 9.9% haircut on accounts at €100,000 or more and a 7% haircut on accounts below €100,000. Such Argentinean solution has no precedent in Europe, which is exactly what's causing the renewed selloff in the euro in a week when the US central bank will likely reiterate the case for further QE. We now have 2 Premium Insights in EURUSD, while 1 of the 3 USDJPY is stopped out, and both AUDUSD and US crude shorts are nearing targets. All of these trades are in the Latest Premium Insights

A hint at further QE from the Bank of England governor ended sterling's short-lived rebound on Friday. Last week, the Australian dollar was the top performer while USD lagged. Weekly CFTC data showed another increase in yen shorts.

Cable climbed as high as 1.5177 on Friday after sinking as low as 1.4831 early in the week but the rally ran out of gas late in the session. Part of the reason for the selloff was a comment from King who told UK television that he sees a case for further asset purchases.

GBP/USD ended the week at 1.5114. The inability to sustain the rally shows how aggressive and confident cable shorts are feeling.

The overarching theme of the week was a reversal in recent USD strength. USD/JPY sank to 95.27 on Friday – about 150 pips from the cycle high. Part of the reason was a surprisingly weak reading on consumer sentiment. The University of Michigan reading fell to the lowest since late 2011 and is a sign that recent economic buoyance hasn't spilled over to shoppers.

For now, the moves look like a simple retracement in the US dollar after weeks of gains but it will bear close watching in the week ahead.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR -25K vs -26K prior JPY -93K vs -73K prior GBP -50K vs -44K prior AUD +23K vs +7K prior CAD -53K vs -47K prior NZD +19K vs +19K prior CHF -13K vs -11K prior

US Dollar Index longs at 32K vs 26K prior

Not a great deal of movement but JPY shorts neared a 5 year low on Tuesday and that helps explain some of the profit taking in the yen crosses. The rebound in AUD positioning shows how eager the market is to be long.