Short squeeze potential energy is gone

Speculative short positions on the euro have collapsed from over 200,000 positions to only about 140,000. This is still about 40% higher than the 2010 peak, when the euro fell below $1.20, which could leave room for a further short squeeze if the market becomes very bullish on the euro. However, the flip-side of the argument is that despite a decline in 60,000 contracts, the euro is lower than it was when there were 200k short contracts. It looks like shorts were shaken out of the market, perhaps afraid of the monster 200k short position and believing this leg of the decline was over. The net result then, is that the euro has missed an up cycle. The euro should be at $1.25 - $1.27 now. Instead, the next leg down looks to start at a lower value, all but assuring a break of the 2010 lows and opening up the next major target: parity.

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