Euro's Record Breaking Run Will Continue According To Positioning

Speculative retail positioning continues to support the EURUSD’s record breaking advance. Since the build up in shorts preceded the breakout above 1.50 last week, the net negative SSI ratio reading has made little effort to turn to parity and the eventual net long reading. The reading stands at -1.68 today, moderating from the -1.81 print from last week. A more significant comparison is made with yesterday’s -2.05 reading – coming before the push above 1.5300. Looking at the positioning details, it’s clear that a greater number of speculative traders are turning with the trend while fewer are trying to call tops. Long positions are 22.7% higher than yesterday and 24.6% greater than last week. On the other side of the coin, shorts are only 0.9% higher than yesterday and 7.5% stronger than last week. Altogether open interest is 8.0% stronger than yesterday and 23.6% above its monthly average.

[I][B]• EURUSD – Euro’s Record Breaking Run Will Continue According To Positioning
• GBPUSD – Pound Positioning Calls Break, Points To Further Gains
• USDJPY – Despite A Major Break, SSI Still Signaling A Rally For The Yen
• USDCHF – Speculative Traders Starting To Join Franc Rally
• USDCAD – Positioning Suggests USDCAD Will Break Below 0.97[/B][/I]
[I] The SSI has been calling for a rally in the EURUSD since the pair was trading at 1.26. [/I][I]Find our more in the DailyFX Forum.[/I]
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* Negative ratio indicates net short


[B]Historical Charts of Speculative Positioning[/B]
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[B]EURUSD – [/B]Speculative retail positioning continues to support the EURUSD’s record breaking advance. Since the build up in shorts preceded the breakout above 1.50 last week, the net negative SSI ratio reading has made little effort to turn to parity and the eventual net long reading. The reading stands at -1.68 today, moderating from the -1.81 print from last week. A more significant comparison is made with yesterday’s -2.05 reading – coming before the push above 1.5300. Looking at the positioning details, it’s clear that a greater number of speculative traders are turning with the trend while fewer are trying to call tops. Long positions are 22.7% higher than yesterday and 24.6% greater than last week. On the other side of the coin, shorts are only 0.9% higher than yesterday and 7.5% stronger than last week. Altogether open interest is 8.0% stronger than yesterday and 23.6% above its monthly average.
[I]For more information, please visit our Euro Currency Room.[/I]


[B]GBPUSD – [/B]The British pound made a significant break above resistance Thursday morning and the Speculative Sentiment Index was on the right side of the move. Net positioning in GBPUSD is still negative at -1.08, slightly less extreme than the -1.09 reading from last week and -1.11 from Wednesday. While this is a modest print in comparison to some of the extremes in some of the other pairs, the deeper liquidity of the GBPUSD improves the sensitivity of the positioning guide to the underlying. From the details, open interest is 5.2% above yesterday’s level and 11.1% above its monthly average. Despite the break above 2.00, longs are only 6.9% higher than yesterday and 11.9% lower than last week. Short positions are up 3.6% from yesterday and 16.6% from last Thursday.
[I]Improve your analysis by visiting the British Pound Currency Room.[/I]


[B]USDJPY – [/B]Few retail traders were evidently convinced by the USDJPY’s break below 105 and the push to fresh multi-year lows that the move brought along with it. The SSI ratio for USDJPY stands at 1.96, down from the more extreme 2.18 reading last week that built up expectations of the eventual breakdown. The details reveal that was just as significant an increase in traders trying to call a bottom on this downdraft as those joining the trend. Short positions rose 5.0% from Wednesday and 13.2% from last week. Long positions are only 0.2% higher than yesterday but 27.3% greater than they were last Thursday. Overall, open interest is up 1.5% from yesterday and is 30.2% above its monthly average. As the SSI is a contrarian indicator, the net positive position signals further USDJPY losses.
[I]Stay up-to-date by visiting our Japanese Yen Currency Room.[/I]


[B]USDCHF – [/B]Finding the same level of momentum as its Japanese counterpart, the Swiss franc has rallied to new record highs against the US dollar; and speculative positioning is keeping the downside open to further declines. However, while positioning is still net positive with a ratio reading of 1.11, the extreme in sentiment is cooling quickly. Just last week, the SSI stood at 1.66. Retail traders have certainly made an effort to join the trend. Short positions grew 20.2% from yesterday and have surged 44.6% since last week. Long trades have actually dropped 11.9% from Wednesday and are 2.5% weaker than last week. Altogether, outstanding positions are 0.8% greater than yesterday and 15.4% above the monthly average. The SSI is a contrarian indicator, so the USDCHF’s reading points to an extended decline.
[I]To learn more about the Swiss Franc, check out the Swiss Franc Currency Room. [/I]


[B]USDCAD – [/B]Congestion has overtaken USDCAD since the pair broke below a mature rising trend channel last week. The Speculative Sentiment Index ratio for the pair stands at 2.35 compared to 2.46 yesterday and 2.66 last Thursday. The lack of direction has encouraged retail traders to take positions in more active pairs, leading USDCAD open interest to rise a modest 0.7%, leaving the overall level of positions 0.8 percent above its monthly average. Digging deeper into the details, longs are 0.6% weaker than yesterday and 0.5% lower than last week. Short positions have grown 3.8% from Wednesday and 5.4% from last week. Since the SSI is a contrarian indicator, the long held net positive reading calls for further USDCAD declines.
[I]Stay ahead of the rest by reviewing additional resources on our Canadian dollar Currency Room.
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[I][B]Written by John Kicklighter[/B], Currency Analyst for DailyFX.com[/I]
Have comments or questions on this or other articles authored by John? E-mail him at <[email protected]>.

[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.