A Currency Reversal Is Underway
The financial world is exciting.
We've got the twists and turns in artificial intelligence... changes in interest rates... never-ending economic indicators... and a constant stream of updates from the world's biggest companies.
In today's information landscape, it's no wonder that no one seems to care about currency moves.
Currencies are boring. Every asset is priced in a currency... But most folks are only looking at the assets themselves – and ignoring the "denominator."
This is a mistake, though. That's because we saw a big currency shift at the end of 2024. And right now, it's setting up a major reversal in one of the world's most important currencies that could lead to a quick double-digit rally.
No one cares about currencies. And that's why almost everyone missed the move that happened at the end of last year.
The U.S. dollar soared 10% from late September through mid-January. That's a massive rally for a major global currency. And it hit a multiyear high along the way.
Of course, a rising dollar means other global currencies are falling... including one of the most important currencies other than the U.S. dollar... the euro.
The euro dropped 8% during the dollar's recent rally. And now, we can expect that to reverse.
That's because the euro's fall pushed it to a massive sentiment extreme. Specifically, futures traders are now betting against the euro to a crazy degree.
We can see it by looking at the Commitment of Traders ("COT") report. This weekly report shows us the real-money bets of futures traders. When these folks all agree on an outcome, the opposite tends to occur.
That's important – because according to the COT report, futures traders all hate the euro right now. Take a look...
Bets on the currency collapsed at the end of 2024. The euro's COT reading hit its lowest level since 2020.
That tells us that futures traders hate this currency. They expect it to keep falling... But according to history, that crowded bet makes a reversal all but certain.
We saw a similar low in 2022. Back then, the euro bottomed... and then rallied 15% in a little more than seven months.
Before that, a similar setup happened in early 2020. Again, the euro soon bottomed – then spent the rest of 2020 rallying 14%.
We also saw similar levels of hate throughout 2015 and 2016. It took the euro a while to finally bottom. But once it did, it was off to the races. The currency jumped 20% in a little more than a year.
The point is, massive, hated COT situations tend to happen alongside major bottoms for the euro. And that's exactly what's happening today.
The euro has already bounced off the lows from early January. And according to history, this could be the start of a multimonth rally that leads to double-digit upside. That means, boring or not, this currency is worth watching right now.
Good investing,
Brett Eversole
Further Reading
"Platinum and palladium are both poised for major moves higher," Brett writes. Right now, platinum is trading at a historic discount to gold... while sentiment around palladium is at an extreme bearish level. Both setups indicate a breakout might be coming in 2025... Read more here.
One weight-loss giant has done nothing but fall since it peaked in mid-2024. But in recent weeks, it hit a rare "oversold" level – and based on history, we could see a 39% rally over the next year... Learn more here.