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EUR/USD Risks Further Losses as Shift in Retail Positioning Continues

EUR/USD Risks Further Losses as Shift in Retail Positioning Continues

David Song,

Talking Points:

- EUR/USD Vulnerable to Further Losses as Shift in Retail Positioning Continues.

- USDOLLAR Extends Advance Following More Fed Rhetoric, Upbeat Consumer Confidence.

Avoid the pitfalls of trading by steering clear of classic mistakes. Review these principles in the "Traits of Successful Traders" series.


EUR/USD Daily Chart

Chart - Created by David Song

  • EUR/USD stands at risk for further losses as it breaks down from the upward trend carried over from the previous month, with the Relative Strength Index (RSI) highlighting a similar dynamic; may see the euro-dollar continue to give back the rebound from the July low (1.0951) as it carves a near-term series of lower highs & lows following the Fed Economic Symposium in Jackson Hole, Wyoming.
  • Positive developments out of Germany accompanied by an uptick in the Euro-Zone’s Consumer Price Index (CPI) may spark a bullish reaction in the single-currency, but the market reaction may be short-lived as there appears to be a material shift in positioning going into the end of the month.
  • Need a break/close below 1.1100 (50% retracement) to favor a test of the key Fibonacci overlap around 1.0950 (23.6% retracement) to 1.0960 (38.2% retracement).
  • The DailyFX Speculative Sentiment Index (SSI) shows the FX crowd remains net-short EUR/USD since July 27, but the ratio appears to have marked a failed test of the 2016 extreme (-2.67) as it narrows from a recent low of -2.66.
  • The ratio currently sits at -1.30 as 44% of traders are long, with long positions 44.0% higher from the previous week, while open interest stands 9.9% above the monthly average.

Why and how do we use the SSI in trading? View our video and download the free indicator here

USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
US Dollar Index12000.9312005.7711957.380.3293.06%
USDOLLAR Daily Chart

Chart - Created by David Song

  • Fresh rhetoric from Fed Vice-Chair Stanley Fischer accompanied by the better-than-expected U.S. Consumer Confidence survey appear to be giving the USDOLLAR a boost especially as the voting-member argues against a ‘one and done’ approach for normalizing monetary policy; may see the greenback continue to trade on a firmer footing as market participants price a greater probability for a 2016 rate-hike.
  • With a number of Fed officials still scheduled to speak ahead of the highly anticipated U.S. Non-Farm Payrolls (NFP) report, another batch of hawkish rhetoric may highlight a growing dissent within the Federal Open Market Committee (FOMC) as the U.S. economy approaches ‘full-employment.’
  • A closing price above 11,989 (50% retracement) may generate a further advance in the USDOLLAR, with the next region of interest coming in around 12,049 (78.6% retracement) to 12,064 (61.8% retracement).
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Read More:

S&P 500: Yellen Sparks Volatility, Market Starts Week at Pivotal Area

USD/JPY Technical Analysis: Implied Vol Shows Trader’s Nerves

EUR/JPY Technical Analysis: Sticking to the Range

EURUSD: Waiting for the Dip & Rip- Key Resistance at 1.1400

--- Written by David Song, Currency Analyst

To contact David, e-mail Follow me on Twitter at @DavidJSong.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.