The Euro however, has seen an abnormally large amount of short-squeezes for a bear market. Today's latest squeeze occurred in not just the euro but in U.S. stock indices following today's U.S. Federal Open Market Committee statement and press conference. The knee-jerk reaction was lower as bears who didn't want to miss any sell-off increase short bets, only to have price find support, turn higher, and start the familiar squeeze pattern with price grinding higher - see chart.
Traders in-step with the current squeeze play pattern are likely in a good position to set up shorts at resistance above between approximately 132.50 up to 133.25. Seeing how market price behaves in the context of fundamental developments and current price pattern validates one of the tenets we teach at IBUniversity.com, which is look to sell following rallies in a downtrend. For all the short squeezes in the Euro over the last year, it is still a bear.
Jay Norris is a Professor at IBUniversity.com and the author of Mastering the Currency Market, McGraw-Hill, 2009 and Mastering Trade Selection and Management, McGraw-Hill, 2011
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