EUR/USD Speculative Longs Increased 45 Percent Since Last Week
GBP/USD Positioning Grew More Net Short
USD/JPY Sentiment Remained Close to Parity
USD/CHF 71 Percent of Total Positioning is Long
USD/CAD Positioning Relatively Unchanged
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.
[B]Historical Charts of Speculative Positioning
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EURUSD - This week, the ratio of longs to shorts is -1.43 as 58.8% of the currently open orders are short. Long orders are 8.7% higher than yesterday and 45.2% stronger since last week. Short orders are 6.1% higher than yesterday and 20.2% stronger since last week. Open interest is 7.2% stronger than yesterday and 44.2% above its monthly average. Speculative positioning flipped to net short in October and has remained mostly net short since then. This condition coincided with a 500 pips appreciation of the euro against the US dollar and has been confirming the accuracy of the SSI as a contrarian indicator. Looking ahead, the SSI continues to favor EURUSD strength.
GBPUSD - The ratio of longs to shorts is -1.28 as 56.1% of the currently open orders are short. Long orders are 8.2% higher than yesterday and 36.6% stronger since last week. Short orders are 2.2% higher than yesterday and 45.2% stronger since last week. Open interest is 4.8% stronger than yesterday and 53.8% above its monthly average. Looking ahead, the SSI signals GBPUSD strength.
USDCHF - The ratio of longs to shorts is 2.42 as 70.8% of the currently open orders are long. Long orders are 2.4% higher than yesterday and 5.0% stronger since last week. Short orders are 0.5% higher than yesterday and 9.5% stronger since last week. Open interest is 1.8% stronger than yesterday and 18.0% above its monthly average. Looking ahead, the SSI signals USDCHF weakness.
USDJPY - The ratio of longs to shorts is 1.11 as 52.5% of the currently open orders are long. Long orders are 7.4% higher than yesterday and 3.6% stronger since last week. Short orders are 5.9% higher than yesterday and 5.5% stronger since last week. Open interest is 6.7% stronger than yesterday and 9.0% above its monthly average. Looking ahead, the SSI signals USDJPY weakness.
USDCAD - The ratio of longs to shorts is 1.59 as 61.4% of the currently open orders are long. Long orders are 2.9% higher than yesterday and 4.6% stronger since last week. Short orders are 2.5% higher than yesterday and 3.4% stronger since last week. Open interest is 2.8% stronger than yesterday and 9.3% below its monthly average. Looking ahead, the SSI signals USDCAD weakness.
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