EURUSD Fails to Break Higher After EU Economic Forecast Downgrades

The focus has again shifted towards Italy, which last week emerged from a technical recession, as the country‘s budget deficit is expected to increase to 2.5% of GDP, above the 2% target that was agreed with Brussels in December. After two consecutive quarters with negative growth at the end of 2018, Italy’s GDP for the first quarter of 2019 has grown by 0.2%, providing some relief for the Eurozone economy. But as Rome is reluctant to implement policies to reduce its deficit, the EU could impose an Excessive Deficit Procedure leading to Italy being fined, which could see Euroscepticism rise within the country.

Eurozone Debt Crisis: How to Trade Future Disasters – Martin Essex, MSTA, Analyst and Editor

DailyFX Economic Calendar

EURUSD PRICE CHART: 15-MINUTE TIME-FRAME (MAY 1 – MAY 7, 2019)

IG Client Sentiment – Retail trader data shows 67.4% of traders are net-long with the ratio of traders long to short at 2.07 to 1. In fact, traders have remained net-long since Apr 12 when EURUSD traded near 1.12763; price has moved 0.9% lower since then. The number of traders net-long is 0.5% lower than yesterday and 14.7% higher from last week, while the number of traders net-short is 9.2% higher than yesterday and 20.4% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EURUSD prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.

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Eurozone Debt Crisis: How to Trade Future Disasters – Martin Essex, MSTA, Analyst and Editor

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--- Written by Daniela Sabin Hathorn, Junior Analyst