Consensus Optimism Index, 2013, Week 20

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Consensus Optimism Index (COI)

Current value: 54.76
Previous value: 47.62

Forex Sentiment index

COI 2013, Week 20

This week’s analysts expectations continue the optimistic mood from the previous week. Almost 55% of the expectations are for better-than-previous values, which is about 15% more than the previous week’s optimistic expectations. Consensuses are again more optimistic for the U.S. data (63%) than for the European one (44%) but while optimistic expectations for the U.S. mark no growth, the analysts expect about 16% more better-than-previous data to be released from Europe. This generally would favor the euro as the currency whose economy receives more positive expectations. On the other hand however, this also increases the danger of negative surprises.

If we examine the analysts’ optimistic expectation by the means of the technical analysis, the following graph would come handy. It presents 5EMA and 10EMA of the correlation between the change in consensus optimism for the each of the last four weeks and the weekly change in the EUR/USD pair.

COI EMAs Setup

First we see that currently the correlation between the change in optimism and the change in the currency pair is negative. Moreover, that downtrend continues. It may try to change its direction but currently a positive change in analysts optimism is related with a negative change in the EUR/USD pair. Which comes to show that the current downtrend of the euro might not be because of more negative than positive economic data. Reasons could be hidden in the market expectations regarding the monetary policy of both central banks – ECB and FED. While the FED has a long history of quantitative easing, the ECB is almost in the beginning. This leaves enough room for negative sentiment towards the euro, despite any positive economic news that might come out. This course of events at some point will, of course, depend on the real actions of ECB and not so much on the market expectations about them.

More info about the economic events and data coming through the current week you could find in our “EUR/USD: The Week Ahead” analysis, published in the SeekingAlpha website.

About the COI Forex Sentiment Index

Our Consensus Optimism Index (COI) measures the proportion between the optimistic analysts expectations and all expectations, including pessimistic. A value above 50 would indicate that the consensuses show a more optimistic than pessimistic picture. Generally, the change in the index could be used as a tool to assess EUR/USD exchange rate market mood. It should be noted however, that the rate rather moves on the real data, or on the difference between the real data and the expectations, i.e. positive or negative surprises.

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