Euro, EUR/USD, EUR/GBP, Technical Analysis, Retail Trader Positioning – IGCS Update
- The Euro has been aiming lower so far this week
- Retail traders boosted EUR/USD, EUR/GBP long bets
- Is this a sign that further pain might be in store?
The Euro has been losing ground against some of its major over the past few trading sessions. In response, retail traders have been boosting upside exposure in pairs like EUR/USD and EUR/GBP. This can be seen by taking a look at IG Client Sentiment (IGCS), which tends to behave as a contrarian indicator. With that in mind, is this a sign that more pain might be in store for the single currency?
EUR/USD Sentiment Outlook - Bearish
The IGCS gauge shows that about 56% of retail traders are net-long EUR/USD. Since most of them are biased to the upside, this hints that prices may continue falling. Meanwhile, upside exposure increased by 3.92% and 92.03% compared to yesterday and last week, respectively. With that in mind, the combination of current and recent changes in positioning offers a stronger bearish contrarian trading bias.
Daily Chart
On the daily chart, EUR/USD broke under a bearish Rising Wedge chart formation. This count hint at the resumption of the dominant downtrend from last year. Still, a Doji candlestick pattern was left behind a couple of days ago as prices struggled to clear the 1.0713 – 1.0787 support zone. This is a sign of indecision. Further upside progress could open the door to revisiting the early February high at 1.1033. Otherwise, extending lower exposes the January low at 1.0483.
EUR/GBP Sentiment Outlook - Bearish
The IGCS gauge reveals that about 42% of retail traders are net-long EUR/GBP. Since most of them are still biased to the downside, this hints prices may continue rising. However, upside exposure increased by 38.46% and 68.22% compared to yesterday and last week, respectively. With that in mind, recent changes in positioning warn that prices may extend lower ahead despite the overall balance of exposure.
Daily Chart
EUR/GBP recently struggled to hold a break above the 38.2% Fibonacci retracement level at 0.892. Prices turned lower towards the near-term rising trendline from December. As such, from a technical standpoint, the pair remains positioned upward. Further losses would open the door to testing the trendline, which may reinstate the upside focus. Otherwise, the January low at 0.8722 would come into focus.
--- Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com
To contact Daniel, follow him on Twitter:@ddubrovskyFX
