Covering Shorts in the Euro

This short position has been a total home run of a trade, with the Euro going into freefall when the ink was barely dry on the Trade Alert.

Rumors swept the foreign exchange pits this morning of a potential interest rate cut by the European Central Bank next week, which they really should have done a long time ago. Otherwise, the strong continental currency will strangle a nascent continental recovery.

The Currency Shares Euro Trust (FXE) November, 2013 $138-$141 bear put spread has gapped up an eye popping 11.3% in value in just two days. As a result, we can realize 86% of the potential profit in this morning’s market. There just is not enough blood left in this stone to make it worth holding 11 more trading days.

I am not covering my euro shorts here because I believe it offers great value. Au contraire! The Euro is, in fact, facing major long-term resistance at $1.40. If ECB president Mario Draghi does not cut interest rates next week, then you can expect the Euro to take another run at the highs. Then we’ll visit the trough for another drink on the short side one more time. If Europe doesn’t cut rates sooner, it will certainly be later.

I wish they were all this easy. On to the next one!

FXE 10-31-13

EUO 10-31-13

Euro Graphic