Short-term sentiment is negative but not at an extreme

EURUSD opens the week in the 1.3420s, largely unchanged on the previous week resulting in a potentially bullish Doji candle, sitting on the weekly 200-SMA. As a reaction to this indecision pattern, forecast averages also consolidated, and the range between the highest and the lowest contribution to the poll shrinked, mostly because sub- 1.32 numbers almost vanished. On the upper side, not many participants were keen to bet above 1.35. Therefore 1.35 should act as psychological resistance. Sell orders on bounces will tend to put their stops above that level.




The skewness: -0.5 a little bit up, close to 0 means that the tails on both sides of the mean balance out, which is the case both for a symmetric distribution. The slightly negative touch means traders are more inclined towards lower prices. In the 1-quarter forecasts skewness has not been negative in 2014, what can be interpreted as a migration of the whole poll towards lower levels, not just a few participants- a quite negative sentiment for EUR/USD.

Kurtosis in the short-term, which describes the shape, and in particular the "peakedness" of that dataset, dropped from 2 the week before to almost 0, meaning there is less variance or extreme deviations among forecasters.


The bias: Short-term sentiment is negative but not at an extreme. Mid-term sentiment, in turn, was above 50% last week, a situation which is associated with swing lows during the bull market displayed in EUR/USD since the lows of 2012. Long-term bulls until now sidelined probably started buying at 1.34, the level they considered to be fair value few weeks ago. The long-term bearishness is recovering from a 11-week low printing 4 weeks to the upside.



What does this mean for traders? The market looks like it is set up for a small short squeeze, the only situation I would go for selling. The first short-term set-up may look like a bearish divergence if we infer how MACD and RSI oscillators may develop below 1,35. An additional sellable point would be on a break above the downward slopping trend line, coincident at 1.35 by end of the week.



Note: The Weekly Sentiment Report provides a breakdown of the data published in the Currencies Forecast Poll through the use of descriptive statistics. The Currencies Forecast Poll is published every Friday at 17:00 Central European Time by FXStreet and aggregates the forecasted values from individuals and companies that were reported from Wednesday to Friday of the same week.The data represents what direction members feel the market will be in the next week, one month and three months.