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S&P 500, AUD/USD, EUR/USD Outlook: Signals in Trader Positioning

S&P 500, AUD/USD, EUR/USD, Trader Positioning – Talking Points

  • S&P 500 could run into fading upside momentum ahead
  • IG Client Sentiment hints that AUD/USD may turn lower
  • EUR/USD at risk to a reversal as prices test key resistance

In this week’s session on IG Client Sentiment (IGCS), I discussed the outlook for the Dow Jones and S&P 500 while also outlining the trajectory for the Australian Dollar and Euro. IGCS is typically viewed as a contrarian indicator. For a more detailed overview that branches into fundamental analysis, check out the recording above.

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S&P 500 Sentiment Outlook – Mixed

The IG Client Sentiment (IGCS) implies that 25.93 percent of S&P 500 traders are net long. Upside exposure has increased by 3.82% compared to yesterday, while overall being down by 16.24% versus last week. Meanwhile, net short bets have declined by 7.80% and 0.35% over a daily and weekly period respectively. The combination of current sentiment and recent changes offers a further mixedtrading bias.

S&P 500, AUD/USD, EUR/USD Outlook: Signals in Trader Positioning

S&P 500 Technical Analysis

The S&P 500 is fast-approaching highs from June, making for a critical barrier of resistance between 3213 and 3231. This follows a bounce off the 20-day simple moving average (SMA) – green line on the daily chart below. Should prices push to new highs ahead, keep a close eye on RSI. Negative divergence could emerge, implying fading upside momentum which can at times precede a turn lower.

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S&P 500 Futures – Daily Chart

S&P 500, AUD/USD, EUR/USD Outlook: Signals in Trader Positioning

Dow Jones Chart Created in Trading View

AUD/USD Sentiment Outlook – Bearish

The IGCS gauge implies that 32.26% of retail traders are net long AUD/USD. Upside exposure has climbed by 12.69% and 7.24% over a daily and weekly period respectively. Recent changes in sentiment warn that the currentprice trend may soon reverse lower despite the fact traders remain netshort. From a psychological perspective, that could speak to a rising share of investors attempting to pick the next bottom in the Aussie.

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S&P 500, AUD/USD, EUR/USD Outlook: Signals in Trader Positioning

Australian Dollar Technical Analysis

AUD/USD is ascending into the key resistance range between 0.7015 to 0.7064. This area consists of highs from the beginning of this year and last month. Similar to the S&P 500, recent gains have followed a bounce off the 20-day SMA. Here too negative RSI divergence risks emerging in the event the Aussie sets new highs ahead. A turn lower places the focus on key support between 0.6777 – 0.6840.

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AUD/USD – Daily Chart

AUD/USD Daily Chart

AUD/USD Chart Created in Trading View

EUR/USD Sentiment Outlook – Bullish

The IGCS gauge implies that 25.50% of retail investors are net long EUR/USD, the least since June 15 when the pair traded around 1.1300. Downside exposure has increased by 11.29% and 29.84% over a daily and weekly basis respectively. Traders are further netshort than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger bullish contrarian trading bias.

S&P 500, AUD/USD, EUR/USD Outlook: Signals in Trader Positioning

Euro Technical Analysis

EUR/USD could be at risk to a turn lower after prices pushed above highs from June but RSI did not follow. This has left behind negative RSI divergence, a sign of fading upside momentum. Should prices reverse course from here, the 20-day SMA could stand in the way as support. Otherwise, further gains from here would place the focus in key resistance which is a range between 1.1446 – 1.1496.

EUR/USD – Daily Chart

S&P 500, AUD/USD, EUR/USD Outlook: Signals in Trader Positioning

EUR/USD Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from July 15 Report

— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter