FxWirePro: Retail sentiment points to further decline in euro

Despite the recent bounce back, the single currency is likely to face further slide,

• At least retail sentiment is pointing in that direction.
• The euro has already declined around 200 pips since it tested key resistance around 1.15 area on 31st January.
• The euro is currently trading at 1.131 against the USD and further pain could be in store for the euro.
• Weaker than expected economic number, especially from European economic powerhouse Germany along with Brexit uncertainty is taking a toll on the single currency.
• But, more importantly, the recent comments from several governing council members suggest that the European Central Bank (ECB) gradually turning more dovish.

Retail sentiment:

• The sentiment reports from IG Markets, which is a UK-based company providing trading in financial derivatives such as contracts for difference and financial spread betting, strongly suggest that the euro is set to decline further.
• IG markets’ retail positions data provide a glimpse to retail traders’ positions, which are largely used a contrarian indicator since retail positioning moves in opposite direction to market movements.
• As of today, the retail positions remain skewed to the upside; 68 percent of retail positions are on the long side, while only 32 percent are short on the euro, suggesting further slide.

We expect the euro to slide below 1.1 area in the short to medium term.