Evidence Grows of Sustained Euro Turnaround
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EURUSD –Heavily one-sided retail FX positions suggest the Euro set an important low versus the US Dollar, and indeed we maintain our contrarian forecast that the EUR may gain further through near-term trading. Just yesterday we saw the largest single-day volume executed in EURUSD since the pair set significant lows and highs through January and February, 2012. This in itself hardly guarantees continued strength, but relatively reward to risk levels leave us in favor of buying dips.
The ratio of long to short positions in the EURUSD stands at -1.53 as 40% of traders are long. Yesterday the ratio was -2.10; 32% of open positions were long. Long positions are 1.3% higher than yesterday and 1.1% above levels seen last week. Short positions are 26.2% lower than yesterday and 17.1% below levels seen last week. Open interest is 17.3% lower than yesterday and 0.5% above its monthly average. We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are short gives signal that the EURUSD may continue higher.
See next currency section: GBPUSD - British Pound Forecast to Fall Further
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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