Euro Forecast Points to $1.2440 Top
Forex trading crowds have now turned net-long the Euro against the US Dollar (ticker: USDOLLAR) for the first time in a week, and a sharp overnight shift could be early sign that the EURUSD set an important short-term top near the $1.2440 mark. According to FXCM Execution desk data, there are currently 1.1 retail FX traders long the EURUSD for every one that is short. The near-neutral ratio would normally seem unremarkable, but this is a noteworthy swing from the ratio of 1.4 traders short for every long seen two days ago as the Euro set a potential double-top.
Our sentiment-based forex trading strategies are not currently in any Euro/US Dollar trades, but a further build in long positions would lead our “Tidal Shift” system to go short EURUSD. Said system goes against major swings in retail trader sentiment—going long if traders are selling aggressively or short if crowds are buying. As the name implies, it is designed to catch major shifts in sentiment and price action. A “Tidal Shift” short position would increase our confidence in calls for a Euro top at $1.2440.
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--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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