The euro is now at $1.318, after being above $1.40 just in the beginning of November. Yet just because the currency has tanked already doesn’t mean we’re anywhere close to a bottom.
Traders are still overwhelmingly net long the euro according to data from Morgan Stanley… (shown in blue below)
…while still mostly net short the U.S. dollar.
You can see the trend change for the dollar, by noting the change from selling momentum a week ago (in yellow, for USD below) to buying momentum (the tiny blue column for USD below).
Thus we’re far from a trough for euro sentiment or a peak for the dollar’s. The euro likely has much room to fall if markets truly unwind the old consensus long-euro/short-dollar bias shown by the top two charts above.
(Via Morgan Stanley, FX Charts Pack, Calvin Tse, 29 Nov 2010)