- EUR/USD is sidelined near 1.1775 ahead of the London open.
- A pullback looks likely with sentiment around the US dollar at bearish extremes.
- EU's digital nationalism may add to bearish pressures around the euro.
EUR/USD may face some selling pressure this week as bearish sentiment on the US dollar has reached extremes at a time when the currency pair’s technical indicators are signaling overbought conditions.
The US Commodity Futures Trading Commission data released on Friday showed the net bearish bets on the greenback rose for the fourth straight week to $24.27 billion – the highest since April 2018 – in the week ended July 28.
Such extreme market positioning is usually considered as a contrarian indicator by sentiment traders, the logic being that sentiment reaches extremes when investors are fully bullish/bearish in the market.
Hence, the pair looks vulnerable to a pullback – more so, as widely-tracked indicators like slow stochastic and relative strength index are indicating that the rally is overdone.
Concerns that European Union’s digital protectionism may anger Washington and Beijing could also add to bearish pressures around the single currency. France recently enacted Gafa tax (Google, Amazon, Facebook, and Apple) to strip revenue from the US digital platforms and advertisers and similar taxes are being prepared by Austria, the Czech Republic, Italy, Spain, and on an EU-wide basis, according to Financial Times.
That said, the pair is unlikely to suffer big losses as the dollar-bearish factors that fueled the recent near-90 degree rally from 1.13 to 1.19 are still valid. Notably, the US Congress remains in a deadlock on how to extend a weekly boost to federal unemployment benefits that ended on Friday.
EUR/USD is currently trading largely unchanged on the day near 1.1774, having hit a low of 1.1740 during the Asian trading hours. Apart from sentiment and technical indicators, trades may take cues from the US ISM Manufacturing data, scheduled for release at 14:00 GMT. The final German and Eurozone manufacturing PMI numbers for July may fail to move the needle on the EUR pairs unless they carry a significant upward or downward revision to preliminary figures released a few days ago.
Technical levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD steady below 1.0800 after US PCE meets expectations
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair barely reacted to US PCE inflation data, with the Greenback shedding some pips. Fed Chair Jerome Powell set to speak ahead of the weekly close.
GBP/USD hovers around 1.2620 in dull trading
GBP/USD trades sideways above 1.2600 amid a widespread holiday restraining action across financial markets. Investors took a long weekend ahead of critical United States employment data next week. Fed Chair Powell coming up next.
Gold price sits at all-time highs above $2,230
Gold price holds near a fresh all-time high at $2,236 in thinned trading amid the Easter Holiday. Most major world markets remain closed, although the United States published core PCE inflation, the Federal Reserve’s favorite inflation gauge.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.