This is a good time for the first post on trader sentiment as specualtive euro longs are near an all-time high (just down from the all-time high made last week actually). At market turns, speculators are on the wrong side and commercial hedgers are on the right side. In other words, a marke top forms when speculators are very long and commercials very short. Looking at commercial buying is important. Commercial buying of the USD index on the NYBOT is the highest since the week that ended 12/12/2006. The EURUSD topped during the week that ended 12/8/2006 at 1.3364 and fell to 1.2865 within 5 weeks. It is not a coincidence that commercials were the longest they had ever been (the USD) just before the USD gained 500 pips against the euro. The same setup is occurring now and a USD low (EURUSD high) should be in place within the next week or two (it may already be in place at 1.3680 but there is no evidence of that yet). The chart below shows the commercial positioning in blue and speculative positioning in red. It is obvious that tops occur when specs are extremely long and when commercials are extremely short. This is the current setup so be ready!

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