Euro at Risk of Reversal as Crowd Capitulates
EURUSD – Forex 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.
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