EUR/USD, GBP/JPY, IG Client Sentiment Outlook – Talking Points:
- Euro eyeing ECB and FOMC minutes, Pound focusing on UK election polling
- Trader positioning hints the near-term EUR/USD uptrend has room to prolong
- GBP/JPY may fall on technical signals and net-long bets in IG Client Sentiment
Join me on Wednesdays at 01:00 GMT as I cover what IG Client Sentiment is saying about the prevailing trends in financial markets!
EUR/USD is approaching this week’s FOMC and ECB minutes with a cautious technical upside bias. Though US-China trade war woes may ultimately prove the key fundamental influence for the world’s most-liquid currency pair. Meanwhile, GBP/JPY is struggling to clear key resistance despite recent UK election polling supporting the British Pound. Where may these pairs go given recent developments in trader positioning?
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Euro Sentiment Outlook
Looking at the IG Client Sentiment report from November 19, about 49 percent of EUR/USD traders are net-long. This is down from about a 63% upside bias since prices bottomed earlier this month. Traders are further net-short than yesterday and from the prior week.This combination of current sentiment and recent changes is offering a stronger EUR/USD-bullish contrarian trading bias.
This may offer the fuel for EUR/USD to push deeper into the psychological barrier between 1.1076 and 1.1110, conforming to bullish technical signals noted in this week’s outlook. Down the road, the pair may encounter a potential falling trend line from June which could keep the dominant downtrend intact. A daily close under 1.0989 puts the focus back on reversing the near-term uptrend from October.
EUR/USD Daily Chart
British Pound Sentiment Outlook
The British Pound’s ascent versus the Japanese Yen has lost momentum since the pickup in net-short bets from this summer came to a grinding halt. After repositioning, traders are roughly evenly split on GBP/JPY directional bets. They are further biased to the upside than yesterday and from last week.The combination of current sentiment and recent changes gives a stronger GBP/JPY-bearish contrarian trading bias.
Coinciding with this are preliminary technical signals hinting that a turn lower in GBP/JPY may be in the cards. Negative RSI divergence under resistance (140.69 – 141.51) shows fading upside momentum which can at times precede a turn lower. A daily close under 138.88 could pave the way for a reversal of the dominant uptrend from August. Uptrend resumption entails a daily close above 141.51.
GBP/JPY Daily Chart
*IG Client Sentiment Charts and Positioning Data Used from the November 19 Report
Euro, British Pound, Yen Trading Resources
— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter