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17 Mar 2014
Flash: EUR/USD sentiment, follow the mode - FXStreet
FXStreet (Barcelona) - Goncalo Moreira CMT, FXStreet Technical Analyst comments that the latest data for the Currencies Forecast Poll, released by FXStreet on Friday the 14th, reveals that sometimes data taken from individual participants -not from the entire poll participants- can provide some clues.
Key Quotes
“In this latest release, we have one poll participant forecasting the EURUSD exchange rate at 1.5000 in a four week time horizon, which pushes the standard deviation from that particular time horizon to hit new highs.”
“This doesn't happen in the one-week and four-month term, where the price range between the lowest and the highest values is not at its maximum. Such a low dispersion in the forecast values is usually understood as a degree of consensus among participants. It's just in the mid-term where we observe more dispersion in opinion.”
“The smoothed central tendency measures are breaking above previous highs from November/December last year, shortening the distance to the actual price. Poll participants expect to end this week at 1.3939, hit the 1.3874 in one month and trade at 1.3729 in three months."
"Very high numbers compared to just 4 weeks ago (1.3742, 1.3588, 1.3404). If we consider the low correlation the long-term forecasts have with the future price (4.14%) - where in the short-term correlation is much higher (93.09%)- then it's obvious we don't look at this number as having some forecasting value. What they are telling is that the EURUSD has gained enough upside traction to make the trading community feel very complacent.”
“What does it mean for traders? Six weeks of higher closes in the EURUSD are impacting the average forecasted values in all time horizons. This means traders are becoming complacent with the trend, they are giving up their negative views in favor of a more constructive future. Since prices discount underlying fundamental conditions, these forecasts also imply a more positive view in the fundamental conditions surrounding the euro vs. the U.S. dollar."
"For any contrarian trader such a high degree of consensus is a fist sign that “euphoria” can suddenly give way to “oh-no-phoria.””
Key Quotes
“In this latest release, we have one poll participant forecasting the EURUSD exchange rate at 1.5000 in a four week time horizon, which pushes the standard deviation from that particular time horizon to hit new highs.”
“This doesn't happen in the one-week and four-month term, where the price range between the lowest and the highest values is not at its maximum. Such a low dispersion in the forecast values is usually understood as a degree of consensus among participants. It's just in the mid-term where we observe more dispersion in opinion.”
“The smoothed central tendency measures are breaking above previous highs from November/December last year, shortening the distance to the actual price. Poll participants expect to end this week at 1.3939, hit the 1.3874 in one month and trade at 1.3729 in three months."
"Very high numbers compared to just 4 weeks ago (1.3742, 1.3588, 1.3404). If we consider the low correlation the long-term forecasts have with the future price (4.14%) - where in the short-term correlation is much higher (93.09%)- then it's obvious we don't look at this number as having some forecasting value. What they are telling is that the EURUSD has gained enough upside traction to make the trading community feel very complacent.”
“What does it mean for traders? Six weeks of higher closes in the EURUSD are impacting the average forecasted values in all time horizons. This means traders are becoming complacent with the trend, they are giving up their negative views in favor of a more constructive future. Since prices discount underlying fundamental conditions, these forecasts also imply a more positive view in the fundamental conditions surrounding the euro vs. the U.S. dollar."
"For any contrarian trader such a high degree of consensus is a fist sign that “euphoria” can suddenly give way to “oh-no-phoria.””