Some interesting comment from Deutsche Bank today:
EUR USD (1.2825) Yesterdayâs EUR-Sentiment Survey* produced one of the most remarkable results of the year: the biggest one-week fall in optimism among medium-term traders and the biggest one-week rise in the euro. The medium-term crowd must have been selling like at no other time this year, but these sales made not a blind bit of difference to the runaway advance. Indeed, the only pause in the rally came just ahead of our former 1.2660 resistance, so it is there that we assume that most of them bailed out. Given that short -term players were on the sell side during those days too, we also assume that a massive long-term buying interest was present in the market. This means that these euros have effectively disappeared (not forever, but, crucially, for a period of time that goes beyond the investment horizon of those that sold). The current target is 1.3040. With bullishness near to its yearâs low, the speculative crowd is now rather badly prepared for further advances. Those who have simply liquidated longs will rue foregone profits if the single-currency continues to march higher. But for those who have sold short, a long-term buyer is a decidedly unwelcome counterparty, as he does not re-sell. If the euro makes a new all-time high, these speculative shorts may need to be hastily unwound and this would provide the fuel for further upside impulses. We set the risk-reward to the bullish scenario at 1.2645/50. Expect intermediate support at 1.2750.
So there would be some good upside yet according to them.
From yesterday's special:
Todayâs result is a record-breaking one: the EURSentiment Survey reveals this yearâs biggest week - on-week slump in overall optimism among medium term traders accompanied by the biggest weekly rise in the euro spot price. Apart from its low in mid-July, the Bull/Bear-Index® hasnât been weaker since May 2003. It appears that the vast majority of the mediumterm crowd opted for profit taking, i.e. for selling the single-currency within the last five sessions.
Given that day-traders were also on the sell side, at least in the last two sessions of last week, the current puzzling task is to identify the source of demand that pushed the euro beyond $1.28. One can only speculate about the buyersâ identity, but it is clear that we are dealing with long-term players, who currently wield enormous power in the market. Presumably, these forces are not sensitive to the euro´s future development. Rather, they might be dollar-based investors (interested in private equity or bonds, for example), who are simply buying the euro as a byproduct of their principal investment activity. Unlike the speculative crowd, these market participants will not necessarily appear on the offer again simply because the euro rises a couple of percent. Effectively, these euros have disappeared from the circulation.
Ironically, despite the already impressive rally, we now observe an environment in which the singlecurrency appears in pretty good health. Importers, the natural bulls will probably look wistfully at any further euro gains and regret missed opportunities. The reluctance of exporters to hedge, on the other hand, means real losses. If they are later forced to play âcatch-upâ we are likely to see their demand at lower levels or, if there is no dip, see them give the euro a boost at higher prices.
Seems consumer confidence number is pegged against a re-election of Bush too (a president hasn't been elected on this low numbers since the 60s - according to Bloomberg).
