The Euro Breaks Long-Term Support: Watch Out for Short Covering

The Euro just broke four year lows over continuing fear over the Greece Sovereign debt crises and the related risks of contagion to Portugal, Spain, Ireland and the rest of the Euro zone.

While the situation is certainly bleak, a large majority of traders are currently short the Euro and you don’t want to sell lows. You can see from the chart below that we just hit a medium term short target and although its definitely possible that we could just keep going in an extension, it’s also very possible that we could see a near-term retracement to 1.26’s as shorts take profit in a crowded trade.

-MJB

(Click to Enlarge)