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Euro at Risk of Reversal as Crowd Capitulates

Euro at Risk of Reversal as Crowd Capitulates

2011-05-12 14:38:00
David Rodriguez, Head of Business Development
Share:
ssi_eur-usd_body_Picture_7.png, Euro at Risk of Reversal as Crowd Capitulates

EURUSDForex trading crowds have broadly shifted towards buying the Euro against the previously-downtrodden US Dollar, giving contrarian signal that the pair could continue to reverse lower through short-term trade. Our SSI shows that the majority of traders remained short EURUSD from January 12 when the pair crossed above the $1.30 mark. The fact that traders recently flipped to net-long for the first time since January emphasized the significant sentiment shift and warns that this could be the start of a major EURUSD reversal.

The ratio of long to short positions in the EURUSD currently stands at -1.19 as nearly 54% of traders are short. Yesterday, the ratio was at 1.03 as 51% of open positions were long. Of note, long positions are 9.5% lower than yesterday and 22.8% weaker since last week. Short positions are 11.0% higher than yesterday and 6.4% stronger since last week. The overnight build in short positions leaves the ratio back in net-short territory, but we feel that the past two weeks of crowd EURUSD buying suggests that the pair may have turned. Indeed, a further build in long positions would give strong contrarian signal to sell into Euro weakness.

To get on the mailing list for the SSI and other reports from author David Rodriguez, e-mail subject line “Distribution list” to

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