Finally a sentiment shift in the long-term forecasts

On Friday, the euro hit 1,3913 and with the NFP-induced thrust the exchange rate was carried into new high ground, allowing it to flirt with the 27th December spike high. Usually burdened by tremendous negativity, the euro now enjoys a more elevated mood judging by the several consecutive weeks of rising forecasts in the FXStreet sentiment poll.


The consecutive higher weekly close prices had surely a brightening impact on the traders' expectations and contributed to the decreased number of bearish views across the three time horizons (1-week, 1-month, 1-quarter). But what stands out to be the most noticeable change is the low percentage of these bearish forecasts (40%) compared to the previous week (75%). Such a plunge in 1-quarter forecasts is the missing piece to an already lopsided market sentiment in the shorter time horizons, and as often happens when the market gets too bullish or too bearish, conditions become ripe for a reversal.



What does it mean for traders? Traders had already become more bullish in the shorter time horizons, but no so in the long-term. The fact that we finally saw a sentiment shift in the long-term forecasts which remained muted for so long in the context of a continued EUR out performance against a plethora of other currencies may present some decent opportunities to trade wide price swings in the next two weeks.



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.