[B]EURUSD[/B] – The majority of forex traders have grown increasingly bearish the euro against the US dollar, and growth in such one-sided sentiment has historically coincided with EURUSD rallies. Indeed, the ratio of long to short positions in the EURUSD stands at -1.37 as nearly 58% of traders are short. Last week this ratio stood almost exactly at party at -1.01, but a 10.5 percent drop in long positions and 11.3 percent gain in short positions has forced a major shift. Open interest is 4.3% below its monthly average due to the holiday-shortened trading week. The SSI is a contrarian indicator and signals more EURUSD gains.
Discuss the EUR/USD with DailyFX Currency Analysts in our own Forex trading forum EUR/USD thread
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[B]FXCM Speculative Sentiment Index (SSI)[/B]
By David Rodríguez, Currency Analyst, Thursday, December 27, 2007
[I]**Twice a day SSI can be found on DailyFX+ under Intraday Analytics[/I]
- [B][I]EURUSD – Contrarian Sentiment May Send Euro to 1.50[/I][/B]
[I][B]- [/B][/I][B][I]GBPUSD – [/I][/B][B][I]Speculative Forex Positioning Grows Less Bearish[/I][/B]
[I][B]- [/B][/I][B][I]USDJPY [/I][/B][B][I]– 59 Percent of Traders are Long the Carry Trade Currency[/I][/B]
[I][B]- [/B][/I][B][I]USDCHF – Sudden Jump in Risk Aversion Limits Effectiveness of SSI Bullish Signal[/I][/B][B][I][/I][/B]
[I][B]- [/B][/I][B][I]USDCAD – Long Positioning Grows More Extreme[/I][/B][B][I][/I][/B]
[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 Currency Trading Forum[/I]
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[B]EURUSD[/B] – The majority of forex traders have grown increasingly bearish the euro against the US dollar, and growth in such one-sided sentiment has historically coincided with EURUSD rallies. Indeed, the ratio of long to short positions in the EURUSD stands at -1.37 as nearly 58% of traders are short. Last week this ratio stood almost exactly at party at -1.01, but a 10.5 percent drop in long positions and 11.3 percent gain in short positions has forced a major shift. Open interest is 4.3% below its monthly average due to the holiday-shortened trading week. The SSI is a contrarian indicator and signals more EURUSD gains.
Discuss the EUR/USD with DailyFX Currency Analysts in our own Forex trading forum EUR/USD thread
[B]GBPUSD [/B]– British Pound positioning has grown somewhat less extreme through very short-term currency trading, but GBPUSD-long positions have surged by 56.3 percent through the past week of trade. Such a significant jump in one-sided interest has historically forced GBPUSD losses, but we likewise note that longs are 5.5 percent lower than yesterday. Our contrarian bias for the GBPUSD remains bearish, but the very short-term shift in positioning suggests that GBPUSD selling pressures may slow in the days ahead.
Discuss the GBP/USD with DailyFX Currency Analysts in our own Forex trading forum GBP/USD thread
[B]USDJPY[/B] – Japanese Yen positioning remains relatively unchanged on the week, but long positions are actually 4.6 percent higher on the day while shorts have fallen a significant 14.2 percent through the same period. Such sudden shifts have typically brought USDJPY losses, and indeed a the ratio of long to short positions in the USDJPY stands at 1.38 as nearly 58% of traders are long. The SSI is a contrarian indicator and signals more USDJPY losses.
Discuss the USD/JPY with DailyFX Currency Analysts in our own Forex trading forum USD/JPY thread
[B]USDCHF[/B] – The sudden risk-linked tumbles in the USDCHF have gone against the modestly bullish SSI bias, but a normalization in sentiment may allow the USDCHF to rally through short-term trade. Increased uncertainty surrounding risk-linked asset classes clouds our bias on the USDCHF, but it remains true that the ratio of long to short positions in the USDCHF stands at -1.08 as nearly 52% of traders are short. In detail, long positions are 0.8% lower than yesterday and 26.2% weaker since last week. Short positions are 7.3% higher than yesterday and 18.3% stronger since last week. Open interest is 3.3% stronger than yesterday and 4.1% below its monthly average. The SSI is a contrarian indicator and signals more USDCHF gains.
[B]USDCAD [/B]– Canadian dollar-bearish sentiment has grown more extreme through recent trade, as the forex trading crowd attempts to catch a bottom on sharp USDCAD declines. Such growth in extremes has historically brought further USDCAD tumbles, and the ratio of long to short positions in the USDCAD stands at 2.23 as nearly 69% of traders are long. Yesterday, the ratio was at 2.07 as 67% of open positions were long. In detail, long positions are 1.6% higher than yesterday and 9.4% weaker since last week. Short positions are 5.7% lower than yesterday and 4.5% weaker since last week. Open interest is 0.8% weaker than yesterday and 4.1% below its monthly average. The SSI is a contrarian indicator and signals more USDCAD losses.
Discuss the USD/CAD with DailyFX Currency Analysts in our own Forex trading forum USD/CAD thread
[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.
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