Watch out! The crowd stands on the one side of a boat----Euro.

Watch out! The crowd stands on the one side of a boat----Euro.                      
            The crowds standing on the one side of a boat cause a tragedy to happen. I see it in Euro speculation. Every day I read more article and news to update my market sense and find almost all analysts, bloggers and even central banker is bearish to Euro recently. Last week, SNB make a nuclear explosion on currency market due to the removal of the peg. SNB expect ECB that will launch a QE to fight deflation this week cause a large capital of inflow to CHF. ECB action will force to them to give up the peg. Most of people overlook there are some data which reveal Europe escape form economic slowdown. Sentiment is one of my indicators to trade and find the opportunity in market. I am now bullish to Euro but wait for some technical signal to catch the rebound such as moving average because catching a falling knife is not my trading style. 

            Figure 1: The latest COT data reveals the short position of Euro from speculators reach at extreme level larger than at Europe sovereign risk in 2010 and Fed launching ending QE in 2012.

Source: Nordea Market and Macrobond

        

            Figure 2: The public opinion towards Euro also hit the extreme pessimistic level.

Source: SentimentTrader

             Figure 3: Currency tends to hit the bottom after QE is launched according to the past market response. It is normal that market is a discounting machine  reflecting expectation before the news.

Source: Nordea Market and Macrobond

            Figure 4: EM-US 2 year yield spread is tightening. Euro is like to rise to eliminate the divergence.

Source: Nordea Market and Macrobond

            

            Figure 5: When the downtrend is formed and reaches the pessimistic level, all good news is often overlooked by the crowd. There are some indicators to reveal Europe economy had hit the bottom recently. M1 leading Europe PMI is rising in the past several months.

Source: Nordea Market and Macrobond

               Figure 6: Demand for Credit and Loans pick up in the ECB Bank Lending Survey. Europe is likely to escape from deflation spiral.

Source: Danske Bank

                 Figure 7: Europe tends to ease their loan standard to enterprise according to the ECB Bank Lending Survey.

Source: Danske Bank

                 Figure 8: Private credit leading GDP growth also is on the uptrend.

Source: Danske Bank

   

                 Figure 9: Various business sentiment indicators are improving since 2014.

Source: Danske Bank

                  Figure 10: On the other hand, US economy is time to take breather. ECRI Leading Index had fallen below negative territory.

Source: Dshort

                  To conclude, Euro rebound is coming soon when almost all bearish factors is discounted. I will take a counter trend attack if my highly sensitive indicators give the signals to long. Of course, stop loss with position is a must to control the risk. However, above analysis still cannot change my view that Euro cyclical bear market (or USD bull market) still is on the way. It only is a short term trade to catch the correction with market extremely sentiment.