**There is substantial risk of loss in trading futures and options.

**Past performance is not indicative of future results

• Most think the Euro is doomed, does that mean it is time for a bounce?

Euro Currency Futures

The Euro currency has been in a relative freefall; the currency has closed negative in 10 of the previous 12 occasions with the two positive closes being marginal at best.   As a result of the slide, the Euro currency is trading at the lowest level it's seen since mid-January. 

Economic data in Europe has been challenged, but that is to be expected.  The primary culprit to the sell-off has been Greece's inability to form a coalition government.  Today's news that Greece would require another election (most likely to take place in early June) to determine the controlling party, triggered a tailspin in the European currency.  Adding fuel to the fire was evidence that the Greek citizens are withdrawing Euro from Greek banks; while this hardly constitutes a run on the banks (yet) traders opted to slightly price in the possibility. 

In light of the most recent round of Greek chaos, it seems the majority of analysts (and now investors) are coming to peace with the rather high probability of Greece leaving the Euro.   Ironically, the market has determined this to be short-term negative for the Euro currency, but most agree it would be a positive for the conglomerate currency in the long run. 

The bottom line is that we've been here before.  Throughout the past two and a half years, we've witnessed large plunges in the Euro in which traders have been "trained" to jump on the bandwagon by a plethora of Euro negative headlines in print and cable media.  However, in each of those scenarios the currency has resiliently bounced back; therefore being complacently bearish is not a viable strategy.  Unfortunately, judging by COT figures published by the CFTC many speculators have fallen into the trap of being "too bearish" the Euro and have been repeatedly punished for being overly confident in their positions by massive short covering rallies. 

As of last week, large speculators were holding a net short position of nearly 143,000 contracts; the record is near 170,000.  We doubt we are at record levels, but it is conceivable that we are close given the drop we've seen thus far this week.  In the past, net positions in excess of 130,000 have been considered a red flag in regards to a price reversal.

Summer seasonal for the Euro tend to be rather directionless; summer months are notorious for choppy trade in currencies.  This isn't necessarily a good reason to buy, but it could be somewhat supportive to the currency.

At this juncture, we aren't overly bullish the Euro but we aren't bearish either and the pace and magnitude of the selling appears to be a little too much too fast.  Accordingly, we like the idea of playing the Euro to the upside in the short term looking for a retracement toward the upper end of the declining channel (1.3150) with the first significant resistance coming in near 1.3020.  In the meantime, support lies near 1.2720, 1.2650 and again near 1.2601.  Bulls should look to establish positions near the noted levels (if seen) with the latter being the most reliable level.  Position: Clients were advised to sell July Euro 120 puts for about 37 ticks, or $462.50. 

**There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results.  The information and data in this report were obtained from sources considered reliable.  Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities.  Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

SEASONAL TENDENCIES ARE A COMPOSITE OF SOME OF THE MORE CONSISTENT COMMODITY FUTURES SEASONALS THAT HAVE OCCURRED OVER THE PAST 15 OR MORE YEARS.  THERE ARE USUALLY UNDERLYING, FUNDAMENTAL CIRCUMSTANCES THAT OCCUR ANNUALLY THAT TEND TO CAUSE THE FUTURES MARKETS TO REACT IN SIMILAR DIRECTIONAL MANNER DURING A CERTAIN CALENDAR YEAR.  WHILE SEASONAL TRENDS MAY POTENTIALLY IMPACT SUPPLY AND DEMAND IN CERTAIN COMMODITIES, SEASONAL ASPECTS OF SUPPLY AND DEMAND HAVE BEEN FACTORED INTO FUTURES & OPTIONS MARKET PRICING.  EVEN IF A SEASONAL TENDENCY OCCURS IN THE FUTURE, IT MAY NOT RESULT IN A PROFITABLE TRANSACTION AS FEES AND THE TIMING OF THE ENTRY AND LIQUIDATION MAY IMPACT ON THE RESULTS.  NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT HAS IN THE PAST, OR WILL IN THE FUTURE, ACHIEVE PROFITS USING THESE RECOMMENDATIONS.  NO REPRESENTATION IS BEING MADE THAT PRICE PATTERNS WILL RECUR IN THE FUTURE.