EUR/USD - Positioning Ratio Grows More Net Short

[DailyFx]

- EUR/USD – Positioning Ratio Grows More Net Short
- GBP/USD –Sterling Shorts make 75% of the Total
- USD/JPY – Open Interest is Relatively Unchanged
- USD/CHF – Long Positioning Grows Less Extreme
- USD/CAD – Longs Down by 2.2 Percent





How to Interpret the SSI?
The FXCM SSI is based on proprietary customer flow information and is designed to recognize price trend breaks and reversals in the four most popularly traded currency pairs. The absolute number of the ratio itself represents the amount by which longs exceed shorts or vice versa. For example if the EURUSD ratio is 2.55, long customer orders exceed short orders by a ratio of 2.55 to 1. Conceptually similar to contrarian analyses using the CFTC IMM open position data or COT Report, the SSI provides an alternative approach that is both more timely and accurate in forecasting currency price movement. The SSI is a contrarian indicator that tells you how the market is weighted and where the trend may head. More long positions don't necessary suggest more confidence in the direction of the current trend. In general, when traders start having adverse movements against their position, many tend to increase the size of their position with the purpose to average down their entry price in one last attempt to recover from previous losses. However, the higher the number of short orders in a bull market the more dangerous is to take additional shorts because many of those traders who just entered the markets are also leaving their protective stop losses just above the current price action.

Historical Charts of Speculative Positioning


EURUSD – Speculative positioning in the EUR/USD flipped to net short in October and has remained mostly net short since then. This week, the ratio of shorts to longs is 1.7 as 63% of the currently open orders are short. Moreover, long orders are 5.3% higher than yesterday and 23.6% weaker since last week. Short orders are 2.1% lower than yesterday and 16.1% stronger since last week. Open interest is 0.5% stronger than yesterday and 4.5% above its monthly average. Looking ahead, the SSI signals EURUSD strength.



GBPUSD - Sterling positioning flipped to net short in October and has remained extreme since then. Today, the ratio of shorts to longs in the sterling is 3.03 as 75.2% of the currently open orders are short. Long orders are 3.4% higher than yesterday and 14.6% stronger since last week. Short orders are 7% higher than yesterday and 10.8% stronger since last week. Open interest is 6.0% stronger than yesterday and 5.1% above its monthly average. Looking ahead, the SSI signals GBPUSD strength.


USDCHF - The Swiss franc speculative positioning has remained net short for most of the last month. This week, the ratio of longs to shorts is 1.52 as 60.3% of the currently open orders are long. Long orders are 1.8% lower than yesterday and 0.3% weaker since last week. Short orders are 6.3% higher than yesterday and 16.1% stronger since last week. Open interest is 1.3% stronger than yesterday and 12.4% above its monthly average. Looking ahead, the SSI signals USDCHF weakness.


USDJPY - This week the ratio of long to short speculative traders is -1.33 as 57.1% of the currently open orders are short. Long orders are 1.2% higher than yesterday and 10.7% stronger since last week. Short orders are 0.2% lower than yesterday and 3.1% weaker since last week. Open interest is 0.4% stronger than yesterday and 6.4% above its monthly average. Looking ahead, the SSI signals USDJPY strength.


USDCAD - The ratio of longs to shorts is 1.62 as 61.8% of the currently open orders are long. In fact, the speculative positioning ratio has remained mostly net long since May 2005. Moreover, long orders are 1.0% higher than yesterday and 2.2% weaker since last week. Short orders are 3.4% higher than yesterday and unchanged since last week. Open interest is 1.9% stronger than yesterday and 1.2% below its monthly average. Looking ahead, the SSI signals USDCAD weakness.

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