Euro Plummet Warns of Further Declines
EURUSD – Wow. I can’t remember the last time retail FX traders were so well-positioned for a massive market move. Traders were short EURUSD into yesterday’s meltdown, and we now favor EUR losses.
Trade Implications – EURUSD: Markets have a nasty way of punishing hubris (excess pride), as it was only a week ago that I said our sentiment-based trading strategies were doing well buying into Euro strength. Clearly those short EURUSD did quite well, and the contrarian traders (our systems and my personal account) got hit hard. Our “Tidal Shift”/Momentum2 strategy has since gone short EURUSD from $1.3245, and I think it makes sense.
The severity of the Dollar move makes the risk of corrections obvious, but we would rather trade in the direction of the stampede (short EURUSD) than try and get cute and play a EURUSD bounce.
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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