EURUSD – An aggressive turnaround in the Euro has been met with a similarly pronounced shift in forex trading crowd positions, and our sentiment-based strategies have closed their previous EURUSD-long position.
Trade Implications – EURUSD: The Euro had finally shown signs of breaking out of its multi-week consolidative trading range—hitting fresh highs above key resistance at $1.32. Our sentiment-based Momentum2 trading system did well in going long from $1.3100, and indeed we said that said positioned remained attractive on the probabilities of a broader Dollar breakdown.
Yet that position was taken out at a small gain by its trailing stop loss, and a sharp decline in EUR short positions means that our strategies will likely remain flat through the foreseeable future. The fact that the month-to-date high of $1.3242 occurred at the US session open on the first trading day of the month in fact suggests that the month of May could bring a larger EURUSD sell-off.
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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