EUR/USD may face some selling pressure this week as bearish sentiment on the US dollar has reached extremes at a time when the currency pair’s technical indicators are signaling overbought conditions. The US Commodity Futures Trading Commission data released on Friday showed the net bearish bets on the greenback rose for the fourth straight week to $24.27 billion – the highest since April 2018 – in the week ended July 28.
EUR/USD is currently trading largely unchanged on the day near 1.1774, having hit a low of 1.1740 during the Asian trading hours. Such extreme market positioning is usually considered as a contrarian indicator by sentiment traders, the logic being that sentiment reaches extremes when investors are fully bullish/bearish in the market. Hence, the pair looks vulnerable to a pullback.