EUR/USD - Current Positioning Calls for EUR/USD at 1.36
GBP/USD - Sentiment Remained Relatively Unchanged
USD/JPY - Positions Outstanding Fell By 14.62%
USD/CHF - Long Positioning Grew Less Extreme
USD/CAD - Ratio Grew Less Net Long
FXCM Speculative Sentiment Index (SSI)
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.
Historical Charts of Speculative Positioning
EURUSD Traders positioning flipped to net short in October and has remained relatively unchanged since then. Moreover, the bearish sentiment in the EUR/USD has been coinciding with a substantial appreciation in the currency pair which confirms the contrarian nature of the SSI. This week, the ratio of longs to shorts is -1.19 as 54.2% of the currently open orders are short. Today, long orders are 10.5% higher than yesterday and 19.4% stronger since last week. Short orders are 13.7% higher than yesterday and 4.9% stronger since last week. Open interest is 12.2% stronger than yesterday and 18.7% above its monthly average. Historically the ratio has been working the best during trending markets and since the ratio is net short the SSI calls for EURUSD strength in the week ahead.
GBPUSD This week, the ratio of longs to shorts is -1.33 as 57.1% of the currently open orders are short. Moreover, long orders are 0.5% higher than yesterday and 6.8% weaker since last week. Short orders are 8.8% lower than yesterday and 9.8% weaker since last week. Open interest is 5.0% weaker than yesterday and 2.1% above its monthly average. The sterling positioning ratio flipped to net short in October and has remained mostly net short since then. Looking ahead, the SSI signals GBPUSD strength.
USDCHF - The ratio of longs to shorts in the Swiss Franc is 2.18 as 68.6% of the currently open orders are long. Long orders are 0.2% higher than yesterday and 5.2% stronger since last week. Short orders are 0.4% higher than yesterday and 12.9% stronger since last week. Open interest is 0.2% stronger than yesterday and 20.3% above its monthly average. Looking ahead, the SSI signals USDCHF weakness.
USDJPY - Yen speculative positioning flipped to net long in March and the ratio of longs to shorts currently stands at 1.24 as 55.3% of the currently open orders are long. Long orders are 3.4% higher than yesterday and 5.0% weaker since last week. Short orders are 3.2% higher than yesterday and 22.3% weaker since last week. Open interest is 3.3% stronger than yesterday and 15.5% above its monthly average. Looking ahead, the SSI signals USDJPY weakness.
USDCAD - The ratio of longs to shorts is 1.38 as 58% of the currently open orders are long. Long orders are 6.9% higher than yesterday and 12.9% weaker since last week. Short orders are 0.2% lower than yesterday and 6.5% weaker since last week. Open interest is 3.8% stronger than yesterday and 2.9% below its monthly average. The speculative positioning ratio in the USDCAD has remained mostly net long since May 2005 and in the week ahead the SSI signals more USDCAD weakness.
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