Market update: Euro two-day rally sees retail bets become slightly more bearish, will EUR/USD rise?
Euro experienced best two days since the middle of September; recently, retail traders have started to build downside bets and while that may be a bullish signal, downtrend remains intact.
The euro climbed for a second trading session, marking the best two-day performance since the middle of September. Meanwhile, it seems retail traders are starting to slowly increase downside exposure. This can be seen by looking at IG Client Sentiment (IGCS), which frequently functions as a contrarian indicator.
With that in mind, will the exchange rate have further room to rally?
EUR/USD sentiment outlook – bullish
The IGCS gauge shows that about 65% of retail traders are net-long EUR/USD. Since most of them remain biased higher, this continues to hint that prices may continue falling down the road. That said, we have seen downside bets increase by 7.05% and 14.98% compared to yesterday and last week, respectively. With that in mind, recent shifts in positioning hint that the Euro may reverse higher.
IG client sentiment chart
EUR/USD technical analysis
Despite developments in retail trader bets, the technical outlook for EUR/USD remains challenging from the bullish perspective. The key obstacle is a falling trendline from July which is maintaining the broader downside focus. As such, while the euro may continue higher in the near term, it is going to take further upside progress to overturn the bearish technical bias.
That said, we did experience positive RSI divergence recently, showing that downside momentum was fading before retail bets started to focus on more downside exposure. Before reaching the trendline, keep a close eye on the 61.8% Fibonacci extension level at 1.0631. Meanwhile, in the event prices turn lower, the 100% level at 1.0436 seems to be key support.
EUR/USD daily chart
This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. 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. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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.
Explore the markets with our free course
Discover the range of markets you can spread bet on - and learn how they work - with IG Academy's online course.
Turn knowledge into success
Practice makes perfect. Take what you’ve learned in this index strategy article, and try it out risk-free in your demo account.
Ready to trade indices?
Put the lessons in this article to use in a live account. Upgrading is quick and simple.
- Get fixed spreads from 1 point on FTSE 100 and Germany 40
- Protect your capital with risk management tools
- Trade more 24-hour markets than any other provider – 26 in total
Inspired to trade?
Put the knowledge you’ve gained from this article into practice. Log in to your account now.
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.
