The outlook for EUR/USD is unclear, data suggest
The recent EUR/USD sell-off has reversed this week as the greenback weakens on further stimulus proposals.
EUR/USD sentiment, price and analysis
- Clients remain short of EUR/USD but the outlook is mixed
- Continued US dollar weakness may allow the pair to fade higher
The latest European Central Bank (ECB) meeting suggests that the central bank will keep monetary policy settings as accommodative as is needed to help the single-block reverse the economic damage caused by the coronavirus. While vaccination programmes are up and running, most of Europe remains in lockdown due to the increasing infection and fatality numbers. This is likely to remain the case for the weeks ahead, keeping downward pressure on the euro. The US dollar is also weak, again due to a highly accommodative central bank, and the greenback is seen underperforming the Euro in the short- to medium-term, leaving EUR/USD room to move marginally higher.
IG Retail trader data shows 46.43% of traders are net-long with the ratio of traders short to long at $1.15 to 1. The number of traders net-long is 6.38% higher than yesterday and 1.44% lower from last week, while the number of traders net-short is 4.07% lower than yesterday and 3.41% higher 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. Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/USD trading bias.
Find out more about forex trading
A look at the daily EUR/USD chart shows the pair trading in a $1.205 - $1.235 range over the last six weeks. Looking at the commodity channel index (CCI) indicator, EUR/USD has oscillated between overbought and oversold during this timeframe and is currently moving towards a neutral position.
Within this range sit the 20- and 50-day simple moving averages (SMAs) and these will likely determine the short-term path for the pair. Both have been supportive until early January and for EUR/USD to test the upper end of the trading range, these two moving averages – currently at $1.2142 and $1.2198 – need to be broken convincingly. It is likely that EUR/USD will remain rangebound in the short term.
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.