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Market update: euro rises against dollar amid US rate cut speculation


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With US rate cut expectations and a weak jobs report driving the euro higher, the EUR/USD faces potential resistance despite retail traders' bullish sentiment.

 

original-size.webpSource: Getty Images

 

Written by: Nick Cawley | Analyst, DailyFX, London
 
Publication date: 

The euro continues to push ahead against the dollar as rate cut expectations in the US grow after last week’s mildly dovish FOMC meeting; and a weaker-than-expected US jobs report. The recent rally is now nearing a cluster of resistance points that may well temper further upside in the short term.

The cluster resistance seen on the EUR/USD daily chart includes a horizontal line of note at 1.0787, both the 50- and 200-day simple moving averages at 1.0792 and 1.0795 respectively, before 1.0800 big figure resistance and trend resistance currently around 1.0815. This block should hold any short-term move unless the US dollar weakens further. The CCI indicator at the bottom of the chart also shows the pair in overbought territory and at levels last seen just before the early March sell-off.

Trend support and a cluster of recent highs around the 1.0735/1.0740 level should act as first-line support ahead of 1.0700.

EUR/USD retail trader data analysis

  • 47.85% of retail traders are net-long EUR/USD, with a short-to-long ratio of 1.09 to 1
  • The percentage of net-long traders is 3.17% higher than yesterday, but 8.25% lower than last week
  • The percentage of net-short traders is 7.05% higher than yesterday and 13.41% higher than last week

This shows that overall, retail traders are positioning more net-short EUR/USD compared to the previous day and previous week. Typically, a contrarian view is taken to crowd sentiment. With retail traders more net-short, this implies a EUR/USD bullish bias from a contrarian perspective.

The data indicates the shift to a more net-short positioning by retail traders over the last day and week gives a stronger EUR/USD bullish contrarian trading bias currently. In summary, the retail trader data suggests EUR/USD may continue rising based on the contrarian interpretation of the increasingly net-short positioning by these traders. The degree of net-short positioning has increased over the short term and compared to last week.

EUR/USD daily price chart

 

original-size.webpSource: TradingView

 

 

 

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. 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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