Short squeeze may be a tailwind for euro

Trading volumes on Friday will be hit by much of the world shutting for the May Day break (Wall Street will be open, while London takes Monday off instead).

Given that a feature of recent sessions has been sharp moves in various assets as punters exited supposedly overcrowded strategies, such a thinning of global attendance could further exacerbate volatility.

For many analysts, currencies have been the main source of these sentiment shifts; particularly the relationship between the euro and the US dollar, where a sudden lurch in favour of the former illustrates changes in attitudes towards the relative performances of the US and eurozone economies.

European stocks have revelled in the euro's decline in recent months, so equity bulls shouldn't moan if the common currency's surge above $1.12 on Thursday weighed on share prices.

The euro's bump up is getting extra lift from a short squeeze.

Coming into this week, net short euro futures positions on US markets remained near record levels.

An update from the CFTC Futures should be released late on Friday.

Unless it shows a significant fall in net shorts, then traders may assume there remains a tailwind behind the euro's resurgence.

That said, such is the velocity of the euro's rally that the EURUSD's 14-day relative strength index, a closely watched momentum gauge, by mid-session on Thursday was up to 67, nearing the supposedly "overbought" threshold of 70.

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