The outlook for EUR/USD is unclear, data suggest

The recent EUR/USD sell-off has reversed this week as the greenback weakens on further stimulus proposals.

EUR/USD sentiment, price and analysis

  • Clients remain short of EUR/USD but the outlook is mixed
  • Continued US dollar weakness may allow the pair to fade higher

The latest European Central Bank (ECB) meeting suggests that the central bank will keep monetary policy settings as accommodative as is needed to help the single-block reverse the economic damage caused by the coronavirus. While vaccination programmes are up and running, most of Europe remains in lockdown due to the increasing infection and fatality numbers. This is likely to remain the case for the weeks ahead, keeping downward pressure on the euro. The US dollar is also weak, again due to a highly accommodative central bank, and the greenback is seen underperforming the Euro in the short- to medium-term, leaving EUR/USD room to move marginally higher.

IG Retail trader data shows 46.43% of traders are net-long with the ratio of traders short to long at $1.15 to 1. The number of traders net-long is 6.38% higher than yesterday and 1.44% lower from last week, while the number of traders net-short is 4.07% lower than yesterday and 3.41% higher 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. Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/USD trading bias.

Find out more about forex trading

A look at the daily EUR/USD chart shows the pair trading in a $1.205 - $1.235 range over the last six weeks. Looking at the commodity channel index (CCI) indicator, EUR/USD has oscillated between overbought and oversold during this timeframe and is currently moving towards a neutral position.

Within this range sit the 20- and 50-day simple moving averages (SMAs) and these will likely determine the short-term path for the pair. Both have been supportive until early January and for EUR/USD to test the upper end of the trading range, these two moving averages – currently at $1.2142 and $1.2198 – need to be broken convincingly. It is likely that EUR/USD will remain rangebound in the short term.

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.