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EURUSD – A substantial shift in retail forex trading sentiment warns that the Euro may continue lower against the US Dollar.
Trade Implications – EURUSD: Retail forex traders recently were their most net-short the Euro on record, which left us cautiously bullish as we generally favor trading against the crowd—if everyone’s short we want to be long. Yet sentiment extremes often coincide with major tops/bottoms.
Tops and bottoms are only clear in hindsight, but a substantial shift away from the record net-short position has left our Momentum2strategy short from $1.3684. And indeed our Senior Currency Strategist favors EURUSD weakness below $1.3655.
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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