Euro Rebounds but Shorts Hit Record

Euro shorts covered some positions on Friday, sending the currency higher but CFTC data showed the futures market is more bearish than ever on the single currency. The kiwi continues to slump as carry trades unwind. Thursdays shorts in EURUSD have been filled. More info on rest below.

The euro climbed closed out the week at 1.2780 after falling as low as 1.2642 in European trading. The reasons for the rebound were not clear but hope the G8 can convince Germany to be less aggressive about austerity and short-covering were likely culprits.

The credit crunch in Spain continues as policymakers struggle to identify the problem and banks continue to bleed cash and deposits. The EUs Rehn said Spanish banks dont need EU aid while Hollande said they could tap the ESM. In the meantime, there was talk about further losses in Spanish regional governments and LCH hiked margins.

Despite the euro rebound, strains continue to mount in other asset classes. The S&P 500 fell another 0.7%, WTI crude fell to $91 and copper turned negative on the year.

The CFTC Commitments of Traders report put euro short positioning at a record, up to 174K from 143K last week. The rest of the report showed a continued pullback in AUD longs and a fresh buildup of CHF shorts:

JPY -34K vs -41K prior

CHF -27K vs -16K prior

AUD +5K vs +25K prior

CAD +51K vs +60K prior

GBP unchaged at +25K

NZD +2.5K vs +6K prior

Thursdays positions are in progress (EURUSD, AUDUSD, USDC AD, CADJPY, gold and US crude). Make sure you note our reminder on EURUSD & those similar conditions. http://ashraflaidi.com/products/sub01/access/?a=637 Nonsubscribers visit here: : http://ashraflaidi.com/products/sub01/

-AB