Euro Strength Likely as US Dollar Corrects Lower

Retail forex traders remain net-short the Euro against the US Dollar (ticker: USDOLLAR) as the pair presses to fresh multi-week highs. We most often use this as a contrarian trading indicator; if trading crowds are short EURUSD, we prefer being long.

Given similarly one-sided professional trading sentiment, we believe that the Euro may continue to correct higher against the safe-haven US currency. Large traders were positioned for the worst of outcomes ahead of the critical Greek elections, and the pro-bailout party win meant that the clear dangers failed to materialize.

Currencies tend to make their highs and lows at the beginning and end of the month. Such seasonal forex tendencies suggest the EURUSD could trade higher through June and perhaps resume its broader downtrend as early as July.

How do we interpret and trade with the SSI? Watch an FXCM Expo Presentation that explains the SSI.

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

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