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EURUSD – Forex trading crowds have bought aggressively into Euro weakness as it nears critical support versus the US Dollar, and the sharp shift warns of volatility ahead.
Trade Implications – EURUSD: We most often go against the crowd; if everyone’s recently bought we like to sell and vice versa. Yet the issue is that extremely low forex volatility gives little reason to expect a major Euro breakdown here. And in fact, the retail trading crowd is often on the right side of major reversals in low-volatility environments.
We’re cautiously bullish the EURUSD until we see a bigger shift in market conditions. A break below $1.35 would obviously negate this bias and be accompanied by a jump in broader market volatility.
See next currency section: GBPUSD - British Pound Rally not Done Just Yet
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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