EURUSD – Forex trading crowds turned aggressively net-long the Euro/US Dollar when it traded below $1.3000 and gave signal that the pair could continue its declines. Yet a more recent moderation in sentiment suggests that the pace of declines may slow. In fact, a bigger shift in sentiment would favor an important Euro reversal higher.
The ratio of long to short positions in the EURUSD stands at 1.06 as approximately 51 percent of traders are long—quite near neutral. This is mostly unchanged from yesterday, but it is significant to note that long positions fell 24.4 percent since last week while shorts have climbed 28.8 percent in the same stretch.
The considerable shift towards crowd selling warns that the Euro could soon turn higher. The risk of reversal can likewise be seen on potential sentiment extremes in Euro futures and options positioning.
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--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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