Euro Forecast to Fall Further Against Dollar
EURUSD – Forex trading crowds continue to buy aggressively into Euro weakness against the US Dollar (ticker: USDOLLAR), and our contrarian sentiment indicator suggests the Euro/US Dollar may continue to decline towards January lows near the $1.26 mark.
Our FXCM Speculative Sentiment Index shows there are 1.25 retail traders long for every one short, and this ratio represents a substantial shift from last week as the number of traders long has surged over 40 percent in 7 days. When crowds shift so quickly in one direction, we have often seen price continue on the exact opposite track. In fact, our SSI-based “Tidal Shift” strategy went short EURUSD from $1.2965 as it positions itself for major turn in trend.
We admittedly took the exact opposite view on the EURUSD just two weeks ago. But as the saying goes—when the facts change we change. Sentiment suggests that a bigger Euro breakdown will unfold, and indeed our technical forecasts call for EURUSD declines.
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--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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