very interesting situation for EURUSD COT report shows very bullish Speculators; at the same time the Forex retail crowd, which was short EU for over a year, now switches to net long The Daily sentiment Index (small futures traders) shows only 18% EU bulls. The USD Index is at 84% bulls. Both can go further in their direction My opinion is, that we may soon, or already, will see some kind of counter ralley. This will get the retail crowd outright bullish on EU. Then the big bang, and EU will dive further down. Then there is the Elliottican crowd….
so far proofed to be true….
the retail crowd has been short (average) since around 1.2236,but some since the 1.24x level. Right now over 62% are long.
smaller option traders have been heavily short since weeks now, and their sentiment index is hoovering around 10 since start of May
COT data shows, that the large specs are covering their record long positions since mid April, nevertheless are long with around 92 mio contracts
Out of my view they are very slow to cover their position this time. Maybe they are hoping for a relief rally in order to cover at better prices. This may lead to further down pressure.
Price is entering a huge support shelf which stretches back to the year 2015
Situation reminds me a lot on the year 2014 relentless drop when we reached the 1.30 level. The crowd was heavily betting on long, and the smaller option traders showed very low sentiment levels for weeks, too. At that time it was a stupid thing to go long as we can see now
Difference is, that in 2015 the large specs where heavily short already (since around the 1.35 level). This can mean, that the large specs are positioned totally wrong this time, and the price of EU has to drop a lot more when the large specs start to accelerate the covering of their long positions.
The EW crowd has collectively changed their minds, when it got obvious, that they were in the wrong count. Most of them now sees us in a wave 5 of 3 now since the top at 255x
For that to be true, the now ongoing move down since a few days has to be the B-wave down of a wave 4 up. If true, we should see soon some upward pressure.
But on the other hand, we may see a brutal wave down, since the action of the past days may also suggest a 1-2, 1-2 movement which is preparing a wave 3 down.
So advice is:
upside pressure may be limited, downside risks are high
be careful with long positions, be careful with new short positions
staying neutral is an option