The ratio of long to short positions in the EURUSD stands at -1.94 as
nearly 66% of traders are short, according to our dealing desk data on
the positioning of more than 20.000 retail traders. Moreover, open
interest is 2.4% stronger than yesterday but 13.4% below its monthly
average, mostly on profit taking by euro longs. In the past, when the majority
of retail traders were short and selling more, the EURUSD has rallied
in the following days. Assuming, this rule holds true for the week
ahead, the SSI gives us a strong signal to buy EUR/USD and we believe the
single currency could test 1.50.
**Twice a day SSI can be found on FXCMTR under Intraday Analytics
[B]EURUSD – Contrarian Traders Target EUR/USD at 1.50
GBPUSD – Nearly 70 percent of Retail Traders are Short the Sterling
USDJPY – Short Positions Are 18 Percent Weaker Since Last Week, Mostly on Profit Taking
USDCHF – Open Interest is 8 Percent Above its Monthly Average.
USDCAD – Positions Outstanding fall 20 Percent on Stop-loss Liquidation[/B]
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[B]EURUSD –[/B] The ratio of long to short positions in the EURUSD stands at -1.94 as nearly 66% of traders are short, according to our dealing desk data on the positioning of more than 20.000 retail traders. Moreover, open interest is 2.4% stronger than yesterday but 13.4% below its monthly average, mostly on profit taking by euro longs. In the past, when the majority of retail traders were short and selling more, the EURUSD has rallied in the following days. Assuming, this rule holds true for the week ahead, the SSI gives us a strong signal to buy EUR/USD and we believe the single currency could test 1.50.
[B]GBPUSD[/B] - The ratio of long to short positions in the GBPUSD stands at -2.37 as nearly 70% of traders are short. Yesterday, the ratio was at -3.12 as 76% of open positions were short. In detail, long positions are 5.3% higher than yesterday and 14.6% weaker since last week. Short positions are 19.9% lower than yesterday and 6.6% stronger since last week. Open interest is 13.8% weaker than yesterday and 8.8% below its monthly average. The SSI is a contrarian indicator and signals more GBPUSD gains.
[B]USDJPY[/B] - The ratio of long to short positions in the USDJPY stands at 1.76 as nearly 64% of traders are long. Yesterday, the ratio was at 1.72 as 63% of open positions were long. In detail, long positions are 0.6% lower than yesterday and 12.6% stronger since last week. Short positions are 3.0% lower than yesterday and 17.7% weaker since last week. Open interest is 1.5% weaker than yesterday and 9.2% above its monthly average. The SSI is a contrarian indicator and signals more USDJPY losses.
[B]USDCHF[/B] - The ratio of long to short positions in the USDCHF stands at 1.87 as nearly 65% of traders are long. Yesterday, the ratio was at 2.56 as 72% of open positions were long. In detail, long positions are 17.3% lower than yesterday and 2.9% weaker since last week. Short positions are 13.1% higher than yesterday and 18.1% stronger since last week. Open interest is 8.8% weaker than yesterday and 8.0% above its monthly average. The SSI is a contrarian indicator and signals more USDCHF losses.
[B] USDCAD[/B] – During this week, the number of positions outstanding fell by 20 percent, mostly on stop loss liquidation. Moreover, currently the ratio of long to short positions in the USDCAD stands at 2.30 as nearly 70% of traders are long. Yesterday, the ratio was at 2.49 as 71% of open positions were long. In detail, long positions are 3.2% lower than yesterday and 27.2% weaker since last week. Short positions are 4.8% higher than yesterday and 1.7% stronger since last week. Open interest is 0.9% weaker than yesterday and 22.1% below its monthly average. The SSI is a contrarian indicator and signals more USDCAD losses.
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.
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