EUR/USD - Traders Increase Short Positions Betting on Strong Non-Farm Payrolls
USD/JPY - Long Positions Are Lower As a Result of Profit Taking
GBP/USD - Open Interest is 38% Below Its Monthly Average
USD/CHF - Extreme Positioning Could Signal A Major Reversal on Dollar Losses
USD/CAD - Nearly 86% of Current Open Positions Is Long
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 - During this week traders chose to increase short positions betting on a stronger than expected non-farm payrolls. Even so, looking ahead the SSI continues to favor EURUSD strength. Positioning has remained mostly net short for the past seven months confirming the precision of the ratio as a contrarian indicator. This week the ratio of longs to shorts stands at negative 1.98 as 66.5% of the currently open orders are short. Long orders are 21.2% higher than yesterday and 23.7% stronger since last week. Short orders are 6.4% lower than yesterday and 8.5% weaker since last week. Open interest is 1.3% stronger than yesterday and 30.2% below its monthly average.
GBPUSD - The ratio of longs to shorts in the Sterling is negative 1.48 as 59.7% of the currently open orders are short. Long orders are 4.2% lower than yesterday and 13.4% stronger since last week. Short orders are 3.8% higher than yesterday and 2% stronger since last week. Open interest is 0.4% stronger than yesterday and 38.6% below its monthly average. Looking ahead, the SSI signals GBPUSD strength.
USDCHF - The ratio of longs to shorts in the Swiss franc stands at 3 as 75% of the currently open orders are long. Long orders are 2% higher than yesterday and 1.7% weaker since last week. Short orders are 7.4% lower than yesterday and 9.3% stronger since last week. Open interest is 0.6% weaker than yesterday and 48.3% below its monthly average. Looking ahead, the SSI signals USDCHF weakness.
USDJPY - The ratio of longs to shorts in the Japanese yen is negative 1.67 as 62.5% of the currently open orders are short. Long orders are 3.1% higher than yesterday and 7.5% weaker since last week. Short orders are 4.4% higher than yesterday and 5.9% stronger since last week. Open interest is 3.9% stronger than yesterday and 42.7% below its monthly average. Looking ahead, the SSI signals USDJPY strength.
USDCAD - The Canadian dollar ratio has remained mostly net long since May 2005, when the pair was trading at 1.26, coinciding with an impressive 1600 pips loss in the currency pair. The ratio of longs to shorts stands at 6.29 as 86.3% of the currently open orders are long. Long orders are 7.7% higher than yesterday and 22.5% stronger since last week. Short orders are 6.2% lower than yesterday and 5.8% weaker since last week. Open interest is 5.6% stronger than yesterday and 20.3% below its monthly average. Looking ahead, the SSI signals USDCAD weakness.
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