Yahoo Finance Despite euro gains, dollar bulls don’t give up
It certainly looks as if the dollar is ceding territory. In a dramatic move, the euro (EURUSD=X) made sharp gains against the greenback this week after retail sales raised concerns about the U.S. economy.
Is the price action simply a brief setback or could it be the start of something bigger? Jonathan Krinsky, chief market technician at MKM Partners believes euro gains are simply due to a short squeeze and won’t last.
“Our research shows that in mid-March bullish sentiment in dollar hit fever pitch exactly when the euro bottomed,” Krinsky said. “That is, in mid-March, speculators betting on the future price of the euro were the most net short that they had ever been on record.”
Get the Latest Market Data and News with the Yahoo Finance App
In turn, too many investors were on one side of the boat. Therefore, a catalyst that reversed the trend was met with an exaggerated response as short sellers covered their bets.
“Too many people were looking for it to go to parity too quickly and the trade unwound,” Krinsky said. Going forward however, Krinksy doesn’t see euro strength lasting terribly long.
“If we go back up to 1.20, trendlines suggest that will be the ceiling.”
And ultimately, Krinsky thinks the dollar and euro will achieve parity. “I think later this year we retest the March lows of 1.05. After that, I think the next stop is parity.”
More from Yahoo Finance
Despite record $180M Picasso, art market no bubble
