US Dollar at Critical Support as Trader Sentiment Calls for Losses
The US Dollar (ticker: USDOLLAR) has fallen significantly off of recent peaks, retail trading crowds have bought aggressively into weakness. Our retail forex trader positioning-based Speculative Sentiment Index suggests that the Dollar is likely to test key lows.
Retail trading crowd sentiment shows traders aggressively sold into recent Euro/US Dollar strength, and indeed short-term EURUSD rallies seem likely as the pair breaks key highs. Yet the ultimate test for the US currency may come at critical Dow Jones FXCM Dollar Index support at multi-month lows near the 9893 mark. A break lower would point to further Euro rallies, and indeed we could conceivably see the EURUSD rally towards February highs near $1.3500 on a USDOLLAR breakdown.
Last week we forecast that the US Dollar could continue its recovery. Yet markets clearly had other things in mind, and our retail sentiment-based Speculative Sentiment Index favors further short-term USD weakness. Will it produce a lasting USDOLLAR breakdown? The next forex market moves may prove pivotal for recently-volatile USD currency pairs.
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--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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