EUR/USD outlook: EUR/USD vulnerable to month-end volatility
Euro recovers from US Dollar short squeeze, however, EUR/USD remains vulnerable below $1.192.
Choppy price action across the G10 complex with the Euro hovering within close vicinity to the $1.19 handle. That said, with the US Thanksgiving Holiday and month-end upon us, market liquidity is likely to be lighter and thus flow driven moves stemming from month-end rebalancing is likely to be exacerbated as evidenced on Monday. While the Euro has recovered from the recent USD short squeeze, EUR/USD has stopped short of reaching key topside resistance at $1.192, as last week’s high zone holds ($1.188-$1.90).
The Euro, however, is not without short-term risks, which as it stands, has largely taken a blind eye to. Poland and Hungary have vetoed further progress over the EU Budget and Recovery Fund in response to the rule of law. Although, with minimal signs of a solution to break the impasse, concerns will likely rise over a delay in the implementation of the recovery fund. A risk that markets appear to be under-pricing at this current stage.
To that end, with US Dollar short positioning remaining stretched, their remains a continued risk of USD short squeezes, leaving EUR/USD vulnerable to pullbacks towards $1.18. A break below raises scope for a move to $1.175, while a move above $1.192 would negate an initial downside bias.
EUR/USD chart: hourly timeframe
IG client sentiment: EUR/USD
Retail trader data shows 28.51% of traders are net-long with the ratio of traders short to long at 2.51 to 1. The number of traders net-long is 6.98% lower than yesterday and 16.78% lower from last week, while the number of traders net-short is 4.38% lower than yesterday and 2.74% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise.
Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/USD-bullish contrarian trading bias.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Start trading forex today
Trade the largest and most volatile financial market in the world.
- Spreads start at just 0.6 points on EUR/USD
- Analyse market movements with our essential selection of charts
- Speculate from a range of platforms, including on mobile
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.