Was this a so-called short squeeze on Friday?

[Tekunda]

When the Euro went down after the positive US data to 1.1380 and suddenly started to turn and move back to 1.1550, was this a so-called short squeeze?
Why else would the Euro suddenly start to gain almost 170 pips after POSITIVE US data?
People suggested that the big players were buying Euros at a bargain price of 1.1380, which was a known strong support to cover the Euros they were short selling from the 1.18 level. Does this explain sufficiently what happened on Friday or is there another explanation for it? Or was this just another prove of the -sometimes - totally unpredictable behaviour of the Forex markets, especially on a Friday?

[albion]

Ive been thinking about that, (I lost 70 pips on Fri) and I have arrived at the following possible solutions, let me know what you think.

1. there was an anthrax scare in the US on Fri morning
2. 8 soldiers and a helicopter down in Iraq late Thurs

These are both USD negative and although they didnt affect the markets straight away they clearly weighed on sentiment

3. USD carries significant event risk over the weekend, as we have seen with 1 and 2 and the EUR is seen as a 'safe' currency

4. 1.14 seems to be a 'sticking point' on EUR/USD if you look at the daily charts on the way up and down, im not sure why, maybe fibo has something to do with it, maybe someone could shed some light on this

I hope this helps, and I only wish I had managed to perform this analysis without the benefit of hindsight

I would put a target of 1.1560 (38.2% fibo of the current downmove) and then expect a further fall

[malamri]

Hi Tekunda

well, I lost loads of pips on friday and with hindsight I think it is because of a combination of;

1/ 1.1385 being major support and the previous days attempts to penetrate this level failed leading to a bounce (also on US positive data) meant traders were reluctant to follow through.

2/ Central Banks buying in the 1.1380 area limiting the fall.

3/ As soon as a bounce occured to 1.1420/40, traders felt the direction of least resistance was up....ie gunning for stops which exasperated the situation.

4/ The terror alert (which is a pathetic excuse)

5/ Traders unwilling to enter new shorts prior to the weekend.

I too think the Eur/USD will hit 1.1550 before new shorts are re-established. But I do not think it will breach 1.1350 and that a range between 1.1350 - 1.16 will ensue.

Martin....but hey, what do I know!!

[fxloop]

I think that this decline in dollar occured because of profit taking on friday.This friday short term and medium term profit taking occured on same day and that's why we saw a little bit bigger decline than on usual friday ...

You can see on your charts that USD started rising on 24th October (I look at usd/chf chart) and did not make a bigger decline since then. So It's normal that profit taking occured a little bit earlier and stronger than usually on fridays due to profit taking. It doesn't make sense if you look at it from the point that we had an extraordinary US non-farm payrolls data which had been expected so impatiently. But the better than consensus expectation of payrolls have already been included in the price if you ask me...



fxloop

[Wallace]

Hello All, my reply to your topic Tekunda is contained in my charts/explanations post in:
http://www.moneytec.com/forums/showthread.php?%20postid=23677\ which I invite you to view.

What I'll add here is that in theory I don't look for any 'outside' reason for the price to move wherever and however it moves, rely instead on chart reading/technical analysis.

The Friday release of economic data had been building into an 'event' all week, and my view of such 'events' and releases are that they are turned into betting events.

It used to be that the Thursday/Friday (?) release of M1 etc caused TBonds to spike (bets ?). I suggested to a friend who traded Bonds he analyse the release/spike and trade his results, he did, quite profitably.

There's a choice of betting what the release data will be, or, 'buy rumor sell news' and wait till the release has occurred then enter a trade, or, stay away till the dust has settled.

I 'don't want to know' the fundamentals that others attach to price movement, though it's impossible to avoid hearing them. I believe there are many techniques with which to analyse price movement, and to anticipate price/trading targets, even for days like Friday. Wallace.

[eternalfuture]

I'd say it was a short-squeeze, no other logical reasons.

If it was caused by another 'Black Hawk Down', I don't think so. What about when the Chinook down with twice casualties? Euro still down at that time.

People pointing out some reasons like falling DJIA, falling chopper, terror alert, because they are out of excuses.

Let's face it, recent US economic figures have been strong. A quantum leap in GDP, double-than before non-farm payrolls (even the August and September numbers were revised UP!), a better unemployment rate, yet the euro ended the week up. I even hallucinating about a confirmed bullish divergence on the daily chart (or is it a bullish divergence?)

However, such a move lack of justification is subject to suspicion. It could be a dead cat bounce.

I don't think any central bank bought at 1.1375 low last Friday. There's no reason for intervention right now.

As for Anthrax scare, I believe the event preceded the euro rally.

However, that is just my opinion. In a market where sentiment sometimes overrides fundamentals and technical aspect, anything is possible.

Cheers!