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What do we Need to see for a Euro Breakout?

What do we Need to see for a Euro Breakout?

David Rodriguez, Head of Product

Why and how do we use the SSI in trading? View our video and download the free indicator here

EURUSD – Retail FX traders remain heavily short the Euro versus the US Dollar, and a purely contrarian view of crowd sentiment points to further gains. The major caveat is clear—it is entirely possible that such one-sided positions point to a major sentiment and price extreme. And indeed the Euro has already pulled back modestly from recent highs.

We would likely need to see a much larger US Dollar breakdown in order to produce a major EUR/USD run higher. It is certainly worth noting the very recent breakdown in the USD/JPY as evidence of a larger Dollar trend reversal. Yet the Dow Jones FXCM Dollar Index continues to hold key lows, and currencies may remain in tight ranges until further notice.

Past performance is not indicative of future results, but our data suggests traders that retail traders tend to do well in slow-moving market conditions. We may need to wait for a sharp jump in volatility to once again take a purely contrarian view of crowd sentiment and favor a EUR/USD break higher.

See next currency section: GBPUSD - Critical to Watch British Pound at Key Lows

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.