EUR/USD Speculative Positioning Grows by 74 pct
GBP/USD Traders Remain Bearish in the Sterling
USD/JPY The Majority of Our Traders Profited From the Massive Gains in Yen
USD/CHF Swiss franc SSI favors Dollar Weakness
USD/CAD Positioning Remains Close To Parity
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.
EURUSD The ratio of longs to shorts in the EURUSD currently stands at negative 1.33 as 57% of the currently open orders are short. In fact, speculative positions have remained mostly net short for the past four months coinciding with 300 pips gain in the currency pair and confirming the precision of the SSI as a contrarian indicator. Moreover, today long orders are 7.2% higher than yesterday and 80.4% stronger since last week. Short orders are 0.4% lower than yesterday and 66.7% stronger since last week. Open interest is 2.7% stronger than yesterday and 25.2% above its monthly average. Looking ahead, the SSI continues to signal EURUSD strength but further gains could be limited since the ratio has been growing less net short in the past few weeks.
GBPUSD Speculative positioning in the Sterling flipped to net short in October and has remained mostly net short since then. Today, the ratio of longs to shorts is -1.63 as 62% of the currently open orders are short. Long orders are 16.3% higher than yesterday and 33.7% stronger since last week. Short orders are 1.4% higher than yesterday and 22.4% stronger since last week. Open interest is 6.6% stronger than yesterday and 7.6% above its monthly average. Looking ahead, the SSI signals GBPUSD strength.less net short in the past few weeks.
USDCHF - The ratio of longs to shorts in the Swiss franc is 1.77 as 64% of the currently open orders are long. Long orders are 0.6% lower than yesterday and 93.7% stronger since last week. Short orders are 5.4% lower than yesterday and 46.3% stronger since last week. Open interest is 2.4% weaker than yesterday and 45.8% above its monthly average. Looking ahead, the Swiss franc SSI favors dollar weakness and confirms the EUR/USD estimate.
USDJPY This week, the majority of our speculative traders profited from the massive gains made by the Japanese yen. As a result of that, our positioning ratio grew less net short since many traders decided to take profits rather than hold their short USD/JPY exposure. Today, the ratio of longs to shorts is negative 1.26 as 55.7% of the currently open orders are short. Long orders are 19.2% higher than yesterday and 84% stronger since last week. Short orders are 7.5% higher than yesterday and 57.3% stronger since last week. Open interest is 12.4% stronger than yesterday and 23.4% above its monthly average. The contrarian nature of the SSI suggests that further yen gains could be limited and the pair should trade higher over the next few days.
USDCAD Speculative positing in the Canadian dollar remains net long but very close to parity. The ratio of longs to shorts is 1.2 as 54.5% of the currently open orders are long. Long orders are 2.9% higher than yesterday and 16.9% stronger since last week. Short orders are 2.1% higher than yesterday and 21.7% stronger since last week. Open interest is 2.5% stronger than yesterday and 29% above its monthly average. Looking ahead, the SSI favors USDCAD weakness.
For information on an FXCM Managed Fund that takes advantage of the SSI, please review our Sentiment Fund at: http://www.FXCMManagedFunds.com or call +1 646-432-2968