EUR/USD outlook: bullish momentum awaits US dollar signal

Euro outlook remains constructive as banking index points to further gains.

Price action in EUR/USD has been relatively uninspiring in recent sessions, with the pair trading in sideways fashion. The euro has managed to hold onto the $1.20 handle, which in turn keeps the outlook constructive for the currency. It has also been better bid against funding currencies (CHF, JPY), however, with euro specific newsflow relatively light, the price action will be likely determined by the US dollar in the near term.

On the technical front, resistance is situated at $1.2172, which continues to curb gains, thus a close above would likely prompt fresh upside momentum, opening the doors for a move towards $1.23. Meanwhile, the US dollar has had multiple tests below the $90.00 handle albeit with little follow through. It is worth noting that the reflation theme remains in full swing with oil prices continuing to rip higher, alongside base metals and while this is perhaps more beneficial for high-beta Forex against the US dollar, the narrative remains bearish for the greenback.

A chart that has grabbed my attention is the euro vs EU stoxx banking index, in which the latter continues to point towards a higher EUR/USD.

EUR/USD vs Stoxx Banking index

EUR/USD chart: daily time frame

IG client sentiment: EUR/USD

Retail trader data shows 44.23% of traders are net-long with the ratio of traders short to long at $1.26 to $1.00. The number of traders net-long is 17.43% higher than yesterday and 0.39% higher from last week, while the number of traders net-short is 5.61% lower than yesterday and 0.19% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise.

Yet traders are less net-short than yesterday, compared with last week. Recent changes in sentiment warn that the current EUR/USD price trend may soon reverse lower despite the fact traders remain net-short.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Start trading forex today

Trade the largest and most volatile financial market in the world.

  • Spreads start at just 0.6 points on EUR/USD
  • Analyse market movements with our essential selection of charts
  • Speculate from a range of platforms, including on mobile

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.