Our GBPUSD SSI reading flipped into net-long territory just two weeks ago and predicted a noteworthy decline in the currency pair. Since then, the ratio has only grown further into net-long territory, as long positions are 11.5% higher than yesterday and 18.5% stronger since last week. Short positions are 6.2% lower than yesterday and 20.3% stronger since last week. Open interest is 3.6% stronger than yesterday and 20.5% above its monthly average. The SSI is a contrarian indicator and signals more GBPUSD losses.
[I][B]• EURUSD – Currency Traders Indecisive, Euro Gearing up for Major Move
• GBPUSD – Pound May Depreciate Further Against US Dollar
• USDJPY – Yen to Gain Further against US Dollar
• USDCHF – Swiss Franc May see Further Correction Before Continued Gains
• USDCAD – Positioning Extreme Cools For Canadian Dollar[/B][/I]
[I]We have been calling for a rally in the EURUSD since the pair was trading at 1.26. Find our more in the DailyFX Forum.[/I]
[B]Currency[/B] [B]Last Week[/B] [B]Present*[/B] [B]% Long[/B] [B]% Change in Positions Outstanding[/B] [B]Signal[/B] EUR/USD -1.59 [B]-1[/B] 50% 6.13% Bullish GBP/USD -1.04 [B]1.44[/B] 59% 19.30% Bullish USD/JPY 1.9 [B]1.74[/B] 63% 35.03% Bearish USD/CHF 1.7 [B]1.42[/B] 59% 13.23% Bearish USDCAD 2.09 [B]2.24[/B] 69% 3.47% Bearish
* Negative ratio indicates net short
[B]Historical Charts of Speculative Positioning
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[B]EURUSD - [/B]The ratio of long to short positions in the EURUSD stands at exact parity as longs and shorts are evenly split at 50 percent per side. Such even sentiment underlines current market indecision and generally choppy price action. Our Speculative Sentiment Index tends to do poorly in these types of markets, but it is worthwhile to note that long positions are 4.2% higher than yesterday and 49.7% stronger since last week. The impressive weekly surge in longs suggests that there may be further downside momentum for the EURUSD pair. Yet we will wait for clearer signal and more extreme positioning before establishing a clear directional bias.
[B]GBPUSD – [/B]Our GBPUSD SSI reading flipped into net-long territory just two weeks ago and predicted a noteworthy decline in the currency pair. Since then, the ratio has only grown further into net-long territory, as long positions are 11.5% higher than yesterday and 18.5% stronger since last week. Short positions are 6.2% lower than yesterday and 20.3% stronger since last week. Open interest is 3.6% stronger than yesterday and 20.5% above its monthly average. The SSI is a contrarian indicator and signals more GBPUSD losses.
[B]USDJPY –[/B]Positioning in the USDJPY has effectively remained unchanged through the past week of trade, with an overall surge in open interest favoring neither side of the trade. In detail, long positions are 6.6% higher than yesterday and 32.1% stronger since last week. Short positions are 7.5% higher than yesterday and 40.1% stronger since last week. Open interest is 6.9% stronger than yesterday and 21.6% above its monthly average. The SSI is a contrarian indicator and signals more USDJPY losses.
[B]USDCHF – [/B]Recent recovery in the USDCHF has left our Speculative Sentiment Indicator in less extreme territory. The ratio of long to short positions in the USDCHF stands at 1.43 as nearly 59% of traders are long. Yesterday, the ratio was at 1.65 as 62% of open positions were long. In detail, long positions are 5.5% lower than yesterday and 16.1% stronger since last week. Short positions are 9.0% higher than yesterday and 10.3% stronger since last week. Open interest is 0.0% weaker than yesterday and 2.2% above its monthly average. The SSI is a contrarian indicator and signals more USDCHF losses.
[B]USDCAD - [/B]The ratio of long to short positions in the USDCAD stands at 2.25 as nearly 69% of traders are long. Yesterday, the ratio was at 2.29 as 70% of open positions were long. In detail, long positions are 2.0% lower than yesterday and 3.7% stronger since last week. Short positions are 0.2% lower than yesterday and 3.2% stronger since last week. Open interest is 1.4% weaker than yesterday and 1.4% above its monthly average. The SSI is a contrarian indicator and signals more USDCAD losses.
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[B]How to Interpret the SSI? [/B]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]For information on an FXCM Managed Account that takes advantage of the SSI, [/B]please review our Sentiment Program at: [U]Portal - FXCM.com or call +1 646-432-2968.