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EUR-USD: Watch Greece, Speculator Data

Monitor Greece and net position data for potential upside reversals and bottoms.

Multi-month trend line resistance for Greece's benchmark index, if broken, could signal a short-term rally for the euro, which now tests major retracement levels.

Greece's ASE index topped out on Oct. 15, 2009, leading EUR-USD to the downside by 30 days. Since then, trading patterns for the ASE index have closely mirrored that for the euro.

Plotting EUR-USD with a 30-day lag beneath the ASE index illustrates those similarities. Trend line resistance for the ASE index near 2000.00, if overcome, would imply declining risk aversion and a future short-term rally for EUR-USD.

In addition, watch EUR/USD large speculator data patterns to possibly signal a bottom.

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Net position data for EUR-USD has reached extreme lows as major price retracement levels are being tested. In the past, new records in negative net positions have not marked bottoms in price.

In 2008, large speculator data (marked by red arrows) registered a then all-time low. The euro rallied in the short term, but then dropped 14% before bottoming. Into that price low and over the following months, the net position data showed a gradual removal of the market's extreme short position. This served to alleviate the downside pressure for EUR-USD and ultimately lead to a more sustained rally. Similar trends in current net position data over the next few weeks and months could lead to potential upside.

Jim Stellakis has over 15 years of experience in technical research and trading; he has focused primarily on the energy and utility complex at investment and trading firms such as Bear Wagner, Touradji Capital, and Millennium Partners. He is currently an independent trader and adviser to buy-side portfolio managers. Stellakis' work focuses on two areas of technical research: relative ratio analysis and price analysis of commodities using Ichimoku analysis. He is a Certified Market Technician (CMT) and holds a Series 86 license (Research Analyst). He graduated with a B.S. in Finance from St. John's University.