Investors are long EURO. Very Long ! The most they have ever been since 2008 and that usually is not a good recipe for further advances.
Option markets recorded the strongest bullish sentiment on the EUR since 2009 and the premium to buy calls has reached a record high. Investors are betting that the ECB will announce a change in its monetary policy on Oct 26th and will start reducing the size of its bond buying program ahead of time.
But with investors being in a crowded one-way bullish bet on the EUR, the meeting could result on either a BUY ON THE RUMOUR SELL ON THE NEWS, or even worse a massive reversal if expectations are not met.
The Chart below shows that the moving averages have triggered a significant SELL signal , the first one since January 2017.
Don’t pin too much hopes on a continuation of the EUR Rally.
