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Is Recovery in Sight for the Euro?

09/22/00 03:14:11 PM
by Jayanthi Gopalakrishnan

Finally the faltering Euro saw an explosive upside move triggered mainly by the US joining forces with Japan and Europe to intervene into the currency markets to help boost the Euro.

Security:   EC
Position:   N/A

Contrarian investors who took advantage of the extreme negative investor sentiment would have benefited from today's explosive upside move. However, I am not convinced that today's price action signals a trend reversal. Although the price breakout was accompanied by extreme high volume, a positive indication, the open interest presents another story. Volume is plotted on the sub-chart below the price chart and open interest is plotted on the sub-chart below volume.

Open interest, which is defined as the total of all unclosed purchases at the end of a session, did not change significantly from the previous day. In the futures markets, a healthy trend is accompanied by increasing open interest. It is only when this open interest starts declining can you expect a reversal. No evidence of a significant decline in open interest should prompt you to adopt the "wait and see" approach.

A healthy trend is accompanied by increasing open interest. A decline in the open interest usually indicates a trend reversal.
Graphic provided by:

Jayanthi Gopalakrishnan

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