The euro executed a classic stop run in late in New York, running up two big figures in four minutes--1.0837-1.1043-- and then ending exactly where it started.
Large stop orders above 1.0850 (chart-eur 1), started it, covering short positions incurred over the duration of the euro fall over the past seven months.
As the orders approach traders, knowing that the afternoon liquidity is poor, start buying below their orders to cover their short positions. That drove the euro higher, activating more orders as everyone scrambles to cover their positions until the orders are all executed.
The general level where the orders were on the chart (chart-eur 2), is given by where the currency pauses on the way back down. Traders who were short from their orders at those levels (and who kept their nerve and did not cover at the top) bought back their positions as the euro came off.
The run up took 4 minutes, the return to ground about 45.
Having been a bank trader during many runs like that I know it seemed much longer to the folks in the seat on the currency desks.
Chief Market Strategist
WorldWideMarkets Online Trading