At the start of the summer the fiscal woes in Europe had hammered the Euro currency and caused the public sentiment for it to fall into an abyss. There was hardly a day without harsh news out of Ireland, Spain, Greece or some other European country which many thought threatened the very future of the common currency.
By one sentiment measure, public opinion had become so lopsided that according to contrarian analysis, we were due for an important inflection point. The Daily Sentiment Index for the Euro plumbed 2% - implying that 98% of the general public or retail traders were bearish on its performance going forward.
In contrast, the US Dollar enjoyed the other extreme state with a DSI reading of 98% - implying that hardly anyone could imagine the dollar going down. That, of course, is exactly what it did in the ensuing months. Woe to any trader that had suggested that the favourite currency haven would actually end up being a trap and that the Euro would be just fine.
That quick recap brings us to today where we are now observing the exact opposite situation between these dueling currencies. Currently, the DSI for the US Dollar is down to 5% (as of September 22nd 2010). And the Euro is suddenly the belle of the ball with a 96% DSI bullish reading. So once again we have the retail crowd herding into opposite corners when it comes to these two currencies and creating yet another opportunity.
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