Euro Sets the Stage for a Win this Week and Retail Traders Are More Bearish EUR/USD

Euro, EUR/USD, Technical Analysis, Retail Trader Positioning – IGCS Update

• Euro sets the stage for a potential win this week
• And, retail traders began turning more bearish
• What technical obstacles does EUR/USD face?

While the week is still fresh, the Euro is seemingly on course for its first 5-day gain since July, potentially ending an 8-week losing streak. In response, retail traders have been becoming more bearish. This can be seen by taking a look at IG Client Sentiment (IGCS), which often functions as a contrarian indicator. With that in mind, could EUR/USD aim higher from here?

EUR/USD Sentiment Outlook – Bullish

The IGCS gauge shows that about 63% of retail traders are net-long EUR/USD. Since most of them are still biased to the upside, this hints that prices may continue falling down the road. This is as downside exposure increased by 24.53% and 12.26% compared to yesterday and last week, respectively. With that in mind, recent changes in exposure warn that the current price trend may reverse higher.

Euro Daily Chart

On the daily chart, EUR/USD has formed a bullish Morning Star candlestick pattern. This is after positive RSI divergence has been showing fading downside momentum, which can at times precede a turn higher. At this stage, confirmation of the candlestick pattern is lacking. Upside progress from here could open the door to extending upward.

Still, prices remain below the 200-day Moving Average and the falling trendline from July. These could prove to be formidable obstacles, maintaining the dominant downside bias. As such, while a near-term reversal is possible, the broader horizon remains bearish.

Chart Created in Trading View

— Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com