Should We Trust this Breakout in the Euro?

The Euro has had quite a run since the lows in early July. Versus the US Dollar, we've seen $EURUSD up from 127 to 138 pretty quickly. But here is where it gets interesting: Last week, the Euro took out its February 1st highs. If you recall, this was the Friday right before the Super Bowl. That Sunday night, while the lights in the Superdome went out, stopping play, emerging markets and Europe were beginning their massive sell-offs. By Monday morning, anything in the Eurozone was down 5-6%; it didn't matter whether it was Germany or Italy - the selling was everywhere. Obviously, with their highly correlated nature, the Euro currency got just as destroyed as the equities.

So here we are deliberating whether or not to trust this "breakout" in Euro to new 52-week highs. I'll present the data, and then you decide. First the chart. This is the Euro Currency Shares ETF daily bars $FXE (although $EURUSD looks exactly the same):

All I have to say is that these new highs better hold...or else....

Next is the sentiment data. This chart is based on a basket of well-established surveys. They include but are not limited to Consensus Inc, Daily Sentiment Index, Bloomberg, Ned Davis, etc. The Bands represent 1.5 standard deviations from a one-year moving average. Look how far above normal bullish consensus is right now for the Euro:

And finally here is the most recent Commitment of Traders Report. The green line at the top shows the Commercial Hedgers, or "smart money", dumping this currency as fast as possible. Meanwhile, the speculators both large and small, or "the dumb money", appear to be buying fairly aggressively up here.

So you tell me: Is it time to be buying the Euro? Or selling it?

Source:

Euro Currency C.O.T. & Public Opinion (SentimentTrader)

Tags: $UUP $DX_F $FXE $EURUSD