The euro has started out the week by rising the highest since June 4 as it builds on a rally for the past week.

Over the past six months it has been rare for the euro to string together several up-days. We remain extremely bearish on EUR and will be using this bounce as another opportunity to sell. The question is: when is the right time to sell EUR/USD?

We noted the IMM data released on Friday. It showed EUR net shorts near record just shy of a record high. Remember that IMM data is from the prior Wednesday (in this case June 11). On that day the euro traded at 1.19 compared to 1.2178 currently.  That points to a short squeeze over the past few days. But with the market positioned so agressively short, the squeeze could still have some way to go.
We see three simple targets. 1.2334, 1.2467 and 1.2691. We don’t see the highest target as realistic. Market participants are so bearish on EUR that it will be sold long before it hits 1.26.

Looking at the Ichimoku Cloud on our 4-hour chart we think a somewhat agressive move higher to 1.2567 is possible if we get a close above the top of the cloud (on a 4hr chart).

We will have our sell orders ready, however, once it gets above 1.2334.

Note that the European Union is hosting a summit beginning Thursday. The market will be looking for signals about fiscal austerity and plans for further market intervention.