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EUR/USD, GBP/JPY Sentiment Outlook: Euro to Rise as Pound Sinks?

EUR/USD, GBP/JPY Sentiment Outlook: Euro to Rise as Pound Sinks?

2019-11-20 04:00:00
Daniel Dubrovsky, Analyst

EUR/USD, GBP/JPY, IG Client Sentiment Outlook - Talking Points:

  • Euro eyeing ECB and FOMC minutes, Pound focusing on UK election polling
  • Trader positioning hints the near-term EUR/USD uptrend has room to prolong
  • GBP/JPY may fall on technical signals and net-long bets in IG Client Sentiment

Join me on Wednesdays at 01:00 GMT as I cover what IG Client Sentiment is saying about the prevailing trends in financial markets!

EUR/USD is approaching this week’s FOMC and ECB minutes with a cautious technical upside bias. Though US-China trade war woes may ultimately prove the key fundamental influence for the world’s most-liquid currency pair. Meanwhile, GBP/JPY is struggling to clear key resistance despite recent UK election polling supporting the British Pound. Where may these pairs go given recent developments in trader positioning?

To learn more about using IG Client Sentiment in your own analysis, check out our free trading guide!

Euro Sentiment Outlook

Looking at the IG Client Sentiment report from November 19, about 49 percent of EUR/USD traders are net-long. This is down from about a 63% upside bias since prices bottomed earlier this month. Traders are further net-short than yesterday and from the prior week.This combination of current sentiment and recent changes is offering a stronger EUR/USD-bullish contrarian trading bias.

EUR/USD, GBP/JPY Sentiment Outlook: Euro to Rise as Pound Sinks?

This may offer the fuel for EUR/USD to push deeper into the psychological barrier between 1.1076 and 1.1110, conforming to bullish technical signals noted in this week’s outlook. Down the road, the pair may encounter a potential falling trend line from June which could keep the dominant downtrend intact. A daily close under 1.0989 puts the focus back on reversing the near-term uptrend from October.

EUR/USD Daily Chart

EUR/USD, GBP/JPY Sentiment Outlook: Euro to Rise as Pound Sinks?

EUR/USD Chart Created in Trading View

British Pound Sentiment Outlook

The British Pound’s ascent versus the Japanese Yen has lost momentum since the pickup in net-short bets from this summer came to a grinding halt. After repositioning, traders are roughly evenly split on GBP/JPY directional bets. They are further biased to the upside than yesterday and from last week.The combination of current sentiment and recent changes gives a stronger GBP/JPY-bearish contrarian trading bias.

EUR/USD, GBP/JPY Sentiment Outlook: Euro to Rise as Pound Sinks?

Coinciding with this are preliminary technical signals hinting that a turn lower in GBP/JPY may be in the cards. Negative RSI divergence under resistance (140.69 – 141.51) shows fading upside momentum which can at times precede a turn lower. A daily close under 138.88 could pave the way for a reversal of the dominant uptrend from August. Uptrend resumption entails a daily close above 141.51.

GBP/JPY Daily Chart

EUR/USD, GBP/JPY Sentiment Outlook: Euro to Rise as Pound Sinks?

GBP/JPY Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from the November 19 Report

Euro, British Pound, Yen Trading Resources

--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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