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Market update: Euro faces six weeks of losses as retail traders persistently remain bullish


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Euro on course for a sixth consecutive weekly loss; retail traders are maintaining their bullish bets and EUR/USD faces rising support from November.

 

original-size.webpSource: Bloomberg

 
Daniel Dubrovsky | Currency Analyst, DailyFX, San Francisco | Publication date: Wednesday 23 August 2023 

EUR/USD sentiment outlook: bearish

The euro is on course for a sixth consecutive weekly loss against the US dollar. If confirmed, this would be the longest losing streak for the EUR/USD since 2018. During this time, retail traders have become increasingly bullish on the euro. 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 further pain be in store for the single currency?

The IGCS gauge shows that about 67% of retail traders are net-long the euro. Since the majority of them remain biased to the upside, this continues to suggest that EUR/USD may fall down the road. This is as upside exposure increased by 22% and 33% compared to yesterday and last week, respectively. With that in mind, the combination of overall exposure and recent changes offers a stronger bearish contrarian trading bias.

IG client sentiment: EUR/USD

 

 

1-euro-faces-6-weeks-of-losses-as-retailSource: TradingView

EUR/USD technical analysis

On the daily chart, EUR/USD has once again dropped to just above the July low of 1.0834. Guiding the single currency lower has been a near-term falling trendline from July – see chart below. Now, the euro is facing a rising range of support from November. Confirming a breakout lower could open the door to reversing the broader bullish technical bias.

That would expose the 78.6% Fibonacci retracement level of 1.0772 on the way toward the May low of 1.0635. Otherwise, pushing above the near-term falling trendline exposes the midpoint of the Fibonacci retracement at 1.0956 before the 38.2% level comes into focus at 1.1031.

EUR/USD daily chart

 

2-euro-faces-6-weeks-of-losses-as-retailSource: TradingView

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.

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