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

[MongiIG]

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

 

Source: Bloomberg

 

EUR/USD Euro United States dollar Forex Shares Market sentiment

 

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

 

 

Source: 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

 

Source: TradingView

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