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Euro Forecast at $1.19 as Sentiment Remains Extreme

Euro Forecast at $1.19 as Sentiment Remains Extreme

2012-05-31 15:13:00
David Rodriguez, Head of Product
ssi_eur-usd_body_Picture_12.png, Euro Forecast at $1.19 as Sentiment Remains Extreme

EURUSD – Forex trading crowds turned aggressively net-long the Euro against the US Dollar (ticker: USDOLLAR) as the pair crossed below the key $1.3000 mark, and exceedingly one-sided sentiment continues to favor EURUSD losses. Our retail crowd-based Speculative Sentiment Index tends to work as an accurate contrarian indicator during volatile and trending markets. FX Options markets predict that currencies will remain especially volatile in the coming weeks, and we see further scope for gains in the safe-haven US Dollar against the downtrodden euro on one-sided sentiment.

Our sample shows 1.27 speculators long the Euro/US Dollar versus every short, down from 2:1 just days ago. Shorts jumped 17.5 percent overnight and 27.5 percent since last week, while longs fell 6 and 9 percent overnight and over 7 days, respectively.

The sharp moderation warns that the EURUSD could consolidate or bounce modestly in the coming days, but the overall trend remains clear in our opinion and we favor continued declines until sentiment sees a more significant shift.

How do we interpret the SSI? Watch an FXCM Expo Presentation that explains the SSI.

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

To receive the SSI via e-mail and other reports from author David Rodríguez, e-mail subject line “Distribution List” to drodriguez@dailyfx.com.Contact David via Twitter at http://www.twitter.com/DRodriguezFX

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