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Euro Price Outlook: EUR/USD, EUR/GBP at Risk Amid Rising Net-Long Bets

Euro Price Outlook: EUR/USD, EUR/GBP at Risk Amid Rising Net-Long Bets

Daniel Dubrovsky, Strategist

Euro, EUR/USD, EUR/JPY, Technical Analysis, Retail Trader Positioning - Talking Points

  • Retail traders are betting the Euro could reverse recent losses
  • EUR/USD and EUR/GBP may be at risk, watch for key support
  • Check out my webinar recording to learn more about IGCS

According to IG Client Sentiment (IGCS), retail investors are increasing their long exposure in Euro pairs like EUR/USD and EUR/GBP as of late. IGCS is typically a contrarian indicator, especially when trends become more developed. With that in mind, this is leaving the Euro vulnerable. For further analysis, check out the recording of this week’s webinar about using the tool in your own trading strategy.

EUR/USD Sentiment Outlook - Bearish

The IGCS gauge implies that about 59% of retail traders are net-long EUR/USD. Upside exposure has increased by 2.9% and 31.9% over a daily and weekly basis respectively. The fact traders are net-long hints prices may continue falling. Moreover, the combination of that and recent changes in sentiment offers a stronger bearish contrarian trading bias.

Euro Price Outlook: EUR/USD, EUR/GBP at Risk Amid Rising Net-Long Bets

Technical Analysis

EUR/USD has appeared to bounce off a recently-formed trendline from about a year ago. The pair also confirmed a Bullish Engulfing candlestick pattern. This is as prices bounced off the 1.1836 – 1.1857 inflection zone. Still, the 20-day and 50-day Simple Moving Averages (SMAs) have formed a bearish crossover. These may also come into play in the event of a material turn higher, acting as resistance. Extending losses would expose the March low at 1.1704.

EUR/USD Daily Chart

Euro Price Outlook: EUR/USD, EUR/GBP at Risk Amid Rising Net-Long Bets

Chart Created in Trading View

EUR/GBP Sentiment Outlook - Bearish

The IGCS gauge implies that about 65% of retail traders are net-long EUR/GBP. Upside exposure has increased by 4.65% and 9.95% over a daily and weekly basis respectively. The fact traders are net-long hints prices may continue falling. Moreover, the combination of that and recent changes in sentiment offers a stronger bearish contrarian trading bias.

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Euro Price Outlook: EUR/USD, EUR/GBP at Risk Amid Rising Net-Long Bets

Technical Analysis

EUR/GBP may be vulnerable to further losses in the aftermath of a bearish crossover between the 20-day and 50-day SMAs. Still, resuming April’s top entails a push under the 0.8540 inflection zone. Beyond that, prices don’t have much to fall before reaching key support, the April low at 0.8472. Passing the latter would then open the door to resuming the top from March 2020.

EUR/GBP Daily Chart

EUR/GBP Daily Chart

Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from June 22nd Report

--- Written by Daniel Dubrovsky, Strategist for DailyFX.com

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

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

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