Bullish Sentiment Signals for EUR/JPY, EUR/CHF

Market sentiment analysis:

  • Many of the financial markets are currently trading sideways, awaiting developments in the coronavirus pandemic and the various disputes between the US and China.
  • However, there are bullish contrarian trading signals for EUR/JPY and EUR/CHF from the IG Client Sentiment data.

Bullish signals for EUR/JPY and EUR/CHF from sentiment data

Traders are in a wait-and-see mood in many financial markets, waiting for positive or negative news about the Covid-19 pandemic and the various disputes between the US and China. However, taking a contrarian view of IG client positioning is currently yielding bullish signals for both EUR/JPY and EUR/CHF.

As the charts below show, both pairs have been heading higher this week.

EUR/JPY Price Chart, One-Hour Timeframe (July 7-14, 2020)

EUR/CHF Price Chart, One-Hour Timeframe (July 7-14, 2020)

Latest EUR/CHF price chart.

Charts by IG (You can click on them for larger images)

Moreover, the IG client sentiment data suggest more gains to come:

For EUR/JPY, the figures show 41.70% of traders are net-long, with the ratio of traders short to long at 1.40 to 1. The number of traders net-long is 1.57% lower than yesterday and 16.93% lower than last week, while the number of traders net-short is 12.56% higher than yesterday and 20.60% higher from last week.

At DailyFX, we typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/JPY prices may continue to rise.Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/JPY-bullish contrarian trading bias.

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For EUR/CHF, the numbers show 71.03% of traders are net-long, with the ratio of traders long to short at 2.45 to 1. The number of traders net-long is 3.24% higher than yesterday and 1.54% lower from last week, while the number of traders net-short is 8.33% higher than yesterday and 14.29% higher from last week.

The fact traders are net-long suggests EUR/CHF prices may continue to fall.Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment suggest the current EUR/CHF price trend may continue.

In this webinar, I looked at the trends in the major currency, commodity and stock markets, at the forward-looking data on the economic calendar this week, at the IG Client Sentiment page on the DailyFX website, and at the IG Client Sentiment reports that accompany it. You might also like to check out the DailyFX Trading Global Markets Decoded podcasts.

Learn how to use IG Client Sentiment data to spot opportunities based on trader positioning and sentiment

— Written by Martin Essex, Analyst and Editor

Feel free to contact me on Twitter @MartinSEssex

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