- EUR/USD Positioning Ratio Calls for Dollar Weakness
- GBP/USD Short Sentiment Grows Less Extreme
- USD/JPY Positioning is Short ahead of the G7 Meeting
- USD/CHF Swiss Longs 14.6% larger since last week
- USD/CAD Positions Outstanding Up by 13 Percent
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 Since the beginning of 2007, the EUR/USD has been trading in a tight range and as a result of that, speculative positioning has remained relatively unchanged and mostly net short. Today, the ratio of longs to shorts is -1.61 as 61.7% of the currently open orders are short. Moreover, long orders are 0.4% higher than yesterday and 13.9% stronger since last week. Short orders are 2.5% higher than yesterday and 10.6% stronger since last week. Open interest is 1.7% stronger than yesterday and 13.3% above its monthly average. Looking ahead, the contrarian nature of the ratio continues to favor EURUSD strength.
GBPUSD - Sterling positioning flipped to net short in October and has remained unchanged since then. This week, the ratio of longs to shorts is -2.03 as 67% of the currently open orders are short. Long orders are 23% higher than yesterday and 34.3% stronger since last week. Short orders are 11.6% lower than yesterday and 6.8% weaker since last week. Open interest is 2.6% weaker than yesterday and 6.4% above its monthly average. Looking ahead, the SSI signals GBPUSD strength.
USDCHF - The ratio of longs to shorts in the Swiss franc is 1.62 as 61.8% of the currently open orders are long. Long orders are 7.8% lower than yesterday and 14.6% stronger since last week. Short orders are 4.6% higher than yesterday and 8.3% stronger since last week. Open interest is 3.5% weaker than yesterday and 21.4% above its monthly average. The Swiss franc speculative positioning has remained net long for most of 2006 and the contrarian nature of the indicator continues to signal USDCHF weakness.
USDJPY On the back of concerns over the upcoming Finance Ministers and Central Bankers G7 meeting, the Japanese yen has been the strongest performing currency. Still, speculative positioning remained relatively unchanged since last week. Today, the ratio of longs to shorts is -1.38 as 57.9% of the currently open orders are short. Long orders are 4% lower than yesterday and 4% stronger since last week. Short orders are 1.6% higher than yesterday and 3.6% stronger since last week. Open interest is 0.8% weaker than yesterday and 8.1% above its monthly average. Looking ahead, the SSI favors USDJPY strength.
USDCAD - Speculative positioning in Canadian dollar has remained net long for most of the last three years and during this week we have no news to give in that front. Today, the ratio of longs to shorts is 1.15 as 53.5% of the currently open orders are long. Long orders are 1.8% higher than yesterday and 0.1% stronger since last week. Short orders are 7.9% higher than yesterday and 33.8% stronger since last week. Open interest is 4.5% stronger than yesterday and 10.6% above its monthly average. Looking ahead, the SSI signals USDCAD weakness.
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