Euro is in a Box

The Euro is stuck in a pretty tight trading range (aka a box) as the world watches the EU to see how they handle all of the mess regarding Europe, Greece, etc.  The buying pressure, or lack of selling over the last couple of weeks, has been tripping buy signals on some of my systems and neutral signals on others.  I'd imagine a bunch of other systems are seeing the same thing.  The important thing to note is that all of these systems were giving sell signals only 2 weeks ago.  So where do we go from here?

Discretionary traders or classic charting traders will be looking for a break of the trading range (see the blue box on the chart below).  A good amount of professionals will be looking for any sign of weakness after a break higher in order to fade the move (short the euro).  I'm currently long the euro b/c that's what my system is saying to do.  Another thing I like to look at in these situations is the Commitment of Traders Report (or C.O.T.).  The C.O.T. is a report of positions of Commercials (big hedgers), large traders (traders holding large positions) and small speculators.  Until recently, the commercials and large trader reports were still bearish, but in the recent report, we saw the first bullish sign in quite a while.  Here's the chart:

When I see a tight trading range and then a change in the COT, I follow signals that are in the same direction as the COT.  Commercials will begin selling (b/c they are hedging so a bigger number is bearish and a smaller number is bullish) and large traders will be buying..and I'm looking to buy as well.  I generally ignore the small speculators number.  There's probably something to be gleaned from it, but I don't use it.  If you're interested in looking at these types of charts, here is a great free website for it.

Have a great weekend.

TLT