Euro finally breaks out of its narrow trading range

Finally, this week we see the euro break out of its narrow $1.43 to $1.49 trading range. As I write this, March euro futures are sitting at $1.5195, compared to $1.4492 three weeks ago.

The prospect that the Federal Reserve will continue cutting interest rates is one factor pushing the U.S. dollar down against the euro, but much of the "action" against the dollar is speculation.

A major portion of the recent move was most likely short covering by counter-trend speculators who saw the modest renewed strength of the dollar since November as an indicator of more dollar strength to come. In fact, probably quite a number of speculators took that bet, but when too many speculators move in the same direction too fast and hard, you can usually bet that a counter-move is soon to come.

The short-term trend is anybody's bet. Some people are absolutely convinced that a recession is here, but that belief does not necessarily make it so.

-- Jack Krupansky