Euro May Have Topped
EURUSD – Our proprietary retail forex sentiment indicator has called for Euro strength since it crossed above $1.27, and steady readings suggest the EURUSD may yet see fresh highs. Yet it is important to note that retail traders have shown early signs of flipping their trading bias. Our Speculative Sentiment Index-based “Tidal Shift” strategy took a short position at $1.3325. The system goes against sharp moves in trader positioning and went against the recent shift towards crowd EURUSD buying.
Past performance is not indicative of future results, but the system has caught several important EURUSD reversals in recent months. In other words, the fact that it is short may be significant. In real terms, the SSI ratio shows there are 1.60 trader short for every 1 long. This is an important change from last week as shorts have fallen 23% and longs are up 18%.
We generally remain bearish the safe-haven US Dollar against the Euro as resilience in financial market risk appetite points to further Greenback losses. Yet the EURUSD has fallen far more than the S&P 500 as of late, and we see early evidence that the pair could have set an important short-term top.
How do we interpret the SSI? Watch an FXCM Expo Presentation that explains the SSI.
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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