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Euro Outlook – EUR/USD and EUR/GBP Technical Analysis and Sentiment Latest

Euro Outlook – EUR/USD and EUR/GBP Technical Analysis and Sentiment Latest

by Nick Cawley, Senior Strategist

The Euro has pushed higher against both the US dollar and the British Pound over the last few sessions despite the market fully expecting the European Central Bank to cut interest rates at the June ECB policy meeting. The US dollar weakness may be short-lived as this week’s US Q1 GDP and Core PCE may still reinforce the longer-term market view that US rates are going to stay higher for longer.

The daily EUR/USD chart shows the pair trading on either side of 1.0700 after rebounding from 1.0600 last week. The April 16th multi-month low coincided with a heavily oversold CCI reading which is now being erased. All three simple moving averages are above the spot price and in a negative pattern, while the pair has posted two major lower highs and lower lows since the end of last year. The next level of resistance is seen at 1.0787, while a confirmed break of 1.0600 will bring 1.0561 and 1.0448 into play.

EUR/USD Daily Price Chart

EUR/USD Sentiment Analysis: Traders Build Net-Shorts, Prices May Still Fall

Retail trader datashows 59.30% of traders are net-long with the ratio of traders long to short at 1.46 to 1.The number of traders net-long is 3.54% lower than yesterday and 16.77% lower than last week, while the number of traders net-short is 20.90% higher than yesterday and 35.35% higher than last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/USD price trend may soon reverse higher despite the fact traders remain net-long.

EUR/GBP jumped last week after BoE commentary that UK inflation is falling towards target. Bank of England rate cut expectations were brought forward, weakening Sterling against a range of currencies. EUR/GBP hit a multi-month high but partially retraced the move yesterday after the CCI indicator flashed a heavily overbought reading. In the short term, the recent double high around 0.8645 should act as resistance if the 200-day simple moving average is broken. The 0.8550 is currently guarded by both the 20- and 50-day smas.


EUR/GBP Sentiment Analysis: Traders Cut Net-Shorts on the Week, Prices May Fall

According to the latest retail trader data, 51.62% of traders are net-long on EUR/GBP, with a long-to-short ratio of 1.07 to 1. The number of net-long traders has increased by 22.75% compared to yesterday but decreased by 26.67% from last week.

Conversely, the number of net-short traders has decreased by 15.19% since yesterday but increased by 61.45% from last week. The contrarian view to crowd sentiment suggests that EUR/GBP prices may continue to fall, despite the current mixed trading bias.

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