Euro, EUR/USD, Technical Analysis, Retail Trader Positioning – IGCS Update
- EUR I had the best two days since mid-September.
- Recently, retail traders have started betting on the downside.
- This may be a bullish signal, but the downtrend remains intact
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The euro rose for the second session, posting its best two-day performance since mid-September. On the other hand, individual traders seem to be gradually increasing their downside margin. You can see this by looking at his IG Client Sentiment (IGCS), which often acts as a contrarian indicator. With that in mind, does the exchange rate have room to rise further?
EUR/USD Sentiment Outlook – Bullish
The IGCS gauge shows that around 65% of retail traders are net long on EUR/USD. Most of them are still biased toward the highs, so this continues to suggest that prices may continue to fall. That said, compared to yesterday and last week, downside bets increased by 7.05% and 14.98% respectively. With that in mind, recent positioning changes suggest that the euro could reverse and rise.
change |
long |
shorts |
OI |
every day | -Five% | 15% | 1% |
weekly | -Five% | 18% | 2% |
euro daily chart
Despite developments in retail traders’ bets, the technical outlook for EUR/USD remains difficult from a bullish perspective. The main obstacle is the downtrend line from July, which maintains the broad downside focus. So, while the euro may continue to rise in the short term, further gains will be needed to reverse the bearish technical bias.
That said, we have seen a positive divergence in the RSI recently, indicating that downside momentum is fading before retail investing begins to focus on further downside exposure. Before reaching the trendline, note the 61.8% Fibonacci extension level at 1.0631. On the other hand, if the price declines, the 100% level at 1.0436 appears to be an important support.
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— Written by Daniel Dubrovsky, Senior Strategist, DailyFX.com
Daily FX We provide technical analysis on foreign exchange news and trends affecting global currency markets.