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Market update: euro plunges after US CPI data, leaving EUR/USD at risk amid more bullish retail bets

Euro plunges most since early October on US CPI data; in response, retail traders boosted upside EUR/USD bets and prices also rejected the key falling trendline from July.

Source: Bloomberg

The euro plunged over 0.8% against the US dollar on Thursday after a higher-than-expected US CPI report, which boosted Treasury yields. That was the worst single day drop since early October. EUR/USD’s drop pushed retail traders to boost upside exposure, which can be seen by looking at IG Client Sentiment (IGCS). The latter tends to function as a contrarian indicator. With that in mind, will the euro continue lower from here?

EUR/USD sentiment outlook – bearish

The IGCS gauge shows that about 69% of retail traders are net-long EUR/USD. Since most of them remain biased higher, this continues to hint that prices may fall down the road. This is as upside bets increased by 10.46% and 5.62% compared to yesterday and last week, respectively. With that in mind, the combination of overall exposure and recent changes offers a stronger bearish contrarian outlook.

IG client sentiment for EUR/USD chart

Source: DailyFX

EUR/USD's technical analysis

Focusing on the daily chart below, EUR/USD has turned lower following a rejection of the falling trendline from July. This has reinstated the broader downside focus following cautious gains since the beginning of this month. Now, immediate support is the March low of 1.0516. Below that is the 100% Fibonacci extension level of 1.0436.

Breaking lower opens the door to extending the broader downtrend, exposing the 123.6% Fibonacci extension level of 1.0315. On the other hand, a turn higher and push above the falling trendline would open the door to an increasingly bullish outlook. That exposes the 61.8% level of 1.0631.

Euro daily chart

Source: 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.


The information 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 Bank S.A. 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 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. See full non-independent research disclaimer.

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