Euro Forecast to Bounce Within Broader Downtrend
EURUSD – Forex trading crowds turned net-short the Euro against the US Dollar (ticker: USDOLLAR) as the pair first crossed above the $1.25 mark just weeks ago, and we have maintained a fairly consistent bullish bias as the pair corrects off of its lows. Retail traders had previously been net-long EURUSD since it broke below $1.30 in early May.
An important jump in short positions suggests that there may be further Euro strength in store. Indeed, total retail short interest is now at its highest since the Euro/US Dollar traded towards multi-month highs near $1.33 in late April/early May. Yet our technical euro forecast underlines our preference to sell any major rallies. Fundamental Euro outlook likewise remains bleak as markets shift focus to potentially pivotal Greek elections this weekend.
The Euro downtrend remains intact until we see unlikely breakthroughs in obvious European fiscal and financial crises. The EURUSD remains strongly linked to fast-falling European bond prices – likely to keep pressure on the Euro through the foreseeable future.
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--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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