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Crowds Short Euro Post-ECB - They Might Be Right

Crowds Short Euro Post-ECB - They Might Be Right

David Rodriguez, Head of Product
ssi_table_story_body_Picture_8.png, Crowds Short Euro Post-ECB - They Might Be Rightssi_table_story_body_Picture_7.png, Crowds Short Euro Post-ECB - They Might Be Right

FXCM Execution Desk data shows that retail traders remain heavily long the US Dollar (ticker: USDOLLAR) against the Euro, and a disappointment in the recent ECB rate decision suggests the crowd stands to gain on EURUSD declines.

We most often go against crowd sentiment, and the fact that crowds are heavily short EURUSD would normally lead us to go in the opposite direction and call for gains. Yet our Speculative Sentiment Index works best as a contrarian indicator through volatile FX market conditions; US Dollar volatility remains near its lowest levels in five years.

The combination of low volatility and critical downside risks to the Euro in September lead us to join crowds as they remain bearish EURUSD. And indeed, we see reason to join the crowd in buying US Dollars across other major currency pairs.

How do we interpret and trade with the SSI? Watch an FXCM Expo Presentation that explains the SSI.

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

To receive the Speculative Sentiment Index and other reports from this author via e-mail, send a message with subject line “Distribution List” to drodriguez@dailyfx.com; Contact David via Twitter at http://www.twitter.com/DRodriguezFX

Meet the DailyFX team in Las Vegas at the annual FXCM Traders Expo, November 2-4, 2012 at the Rio All Suite Hotel & Casino. For additional information regarding the schedule, workshops and accommodations, visit the FXCM Trading Expo website.

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

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