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Euro Remains Likely to Test Key Highs

Euro Remains Likely to Test Key Highs

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 are net-short the Euro versus the US Dollar and have remained short since the pair set a key low near $1.09 in early March. A contrarian view of ‘crowd’ sentiment leaves us with a firmly bullish trading bias as retail traders remain short.

The clear caveat is simple—going against the majority of retail traders only works when markets move against them. Past performance is not indicative of future results, but our data suggests that going against the crowd has been a winning strategy overall. Yet the same data shows retail traders tend to outperform in slow-moving market conditions. In practice this means that our contrarian trading strategy can do poorly in low-volatility/range-bound market conditions.

We will remain cautiously bullish the Euro as long as crowds remain short, but it is important to note this strategy may underperform if the EUR/USD continues to trade in a narrow range.

See next currency section: GBPUSD - Recent Moves Confirm End to British Pound Downtrend

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