EURUSD – Retail trading crowds have aggressively sold into recent Euro strength against the fast-falling US Dollar (ticker: USDOLLAR), giving us contrarian signal that the EURUSD may continue to fresh highs. Last week we claimed that a sharp shift in retail sentiment favored EURUSD losses, but markets clearly had other things in mind as the single currency remained in a choppy trading range. If price action remains choppy, this may be an opportunity to buy into US Dollar weakness.
Yet a EURUSD break above the 4/5 high of $1.3163 leaves little in the way of technical resistance beyond the 3/29 low of $1.3250 and eventually the March high of $1.3380. What might ultimately decide whether the US Dollar hits fresh lows against the Euro? The Dow Jones FXCM Dollar Index sees critical support at 9893. We believe a significant break lower in the USDOLLAR could ultimately push the Euro/US Dollar to February peaks near the $1.35 mark. The flip in retail sentiment leaves our short-term bias to the topside.
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--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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