Retail forex trading crowds are now their most net-long Euro against the US Dollar (ticker: USDOLLAR) since the single currency broke below $1.25 through the final week of May. Our proprietary Speculative Sentiment Index data shows that there are 1.7 traders long for every one short—nearly two-thirds of the crowd is currently long EURUSD.
When retail sentiment is so sharply net-long and traders continue to buy, we most often call for further currency declines. In fact long interest has grown 16 percent since last week while shorts have fallen by the same.
As of time of writing the Euro traded a mere 100 pips ($0.0100) above multi-year lows of $1.2290. We believe that the Euro stands to fall further towards critical support at 2010 lows near $1.1875 as sentiment favors weakness and European crises intensify.
How do we interpret and trade with 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
