-EURUSD – Euro Forecast Unclear on Sharp Shifts in Forex Sentiment
-GBPUSD – British Pound Forecast Turns Bearish on Crowd Positioning
-USDCHF – Swiss Franc Expected to Rally Further Versus US Dollar
-USDCAD – Canadian Dollar Forecast Remains Bullish Against US Dollar
-USDJPY – Japanese Yen Forecast Unclear Against US Dollar
The SSI sought a EURUSD rally since 1.26 and was signaling a reversal around 1.60. Find our more in the DailyFX Forex Forum
Historical Charts of Speculative Forex Trading Positioning[/B]
[B]EURUSD – [/B]Forex trading crowd biases on the EURUSD have shifted quickly, and recent volatility in crowd sentiment has left our SSI-based forex trading systems effectively flat the currency pair. The headline SSI ratio still registers at -1.54 as nearly 61% of traders are short—giving a contrarian signal to buy the currency pair. Yet short positions are actually 11.2 percent lower on the week, and the crowd’s short bias is waning. Yesterday, the ratio was at -1.27 as 56% of open positions were short. Unpredictable shifts in forex positioning make our SSI-based bias summarily unclear. Of two purely SSI-based momentum trading systems, one is currently short while another has gone long.
[B]GBPUSD –[/B] Forex trading crowds have continued to sell the British Pound against the US Dollar, but the rate of selling has dropped sharply and our SSI-basedforex trading systems have actually sold the currency pair. The ratio of long to short positions in the GBPUSD stands at -1.18 as nearly 54% of traders are short. Yesterday, the ratio was at 1.03 as 51% of open positions were long. In detail, long positions are 19.3% lower than yesterday and 0.7% stronger since last week. Short positions are 1.8% lower than yesterday and a substantial 32.3% weaker since last week. Open interest is 10.7% weaker than yesterday and 64.9% above its monthly average. The sharp drop in short positions lends credence to the argument for a noteworthy GBPUSD top.
[B]USDJPY –[/B] Forex trading crowds remain long the US Dollar against the Japanese Yen, but relatively choppy price action has left our sentiment-based trading signals effectively flat the pair. The ratio of long to short positions in the USDJPY stands at 1.41 as nearly 59% of traders are long. Yesterday, the ratio was at 1.64 as 62% of open positions were long. In detail, long positions are 4.0% lower than yesterday and 7.1% stronger since last week. Short positions are 11.6% higher than yesterday and 34.8% weaker since last week. Open interest is 1.9% stronger than yesterday and 87.5% above its monthly average. The SSI is a contrarian indicator and signals more USDJPY losses, but we would preferably wait for further sentiment extremes before taking a stronger position on the currency pair.
[B]USDCHF –[/B] Our forex trading signals are effectively flat the USDCHF as sharp shifts in sentiment have made forecasts unclear.The ratio of long to short positions in the USDCHF stands at 3.21 as nearly 76% of traders are long. Yesterday, the ratio was at 2.70 as 73% of open positions were long. In detail, long positions are 5.4% higher than yesterday and 11.4% weaker since last week. Short positions are 11.2% lower than yesterday and 12.3% weaker since last week. Open interest is 0.9% stronger than yesterday and 82.0% above its monthly average. The SSI is a contrarian indicator and signals more USDCHF losses.
[B]USDCAD – [/B]Our forex trading signals are on aggregate short the US Dollar against the Canadian Dollar, as fairly one-sided forex crowd positioning suggests further losses are likely. The ratio of long to short positions in the USDCAD stands at 1.61 as nearly 62% of traders are long. Yesterday, the ratio was at 1.30 as 57% of open positions were long. In detail, long positions are 2.2% lower than yesterday and 21.0% weaker since last week. Short positions are 20.8% lower than yesterday and 0.0% weaker since last week. Open interest is 10.3% weaker than yesterday and 76.2% above its monthly average. The SSI is a contrarian indicator and signals more USDCAD losses.
How do we 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
[B]Follow up-to-the-minute updates on the SSI through DailyFX+ and our newest product:[/B][B] The Forex Stream[/B]
[I]Have any further questions about the SSI and forex positioning data? Ask the author David Rodríguez on our forex forum.
We love getting feedback on our reports. Tell us how we’re doing: E-mail the author of this report at <[email protected]>. [/I]