- EUR/USD Speculative Positioning Signals Euro Strength
- GBP/USD Positions Outstanding Rise by Nearly 12%
- USD/JPY Traders Cut Short Positions on Profit Taking
- USD/CHF Swiss Franc Sentiment Calls for Dollar Weakness
- USD/CAD Traders Positioning Remains Well Balanced
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.
[B]Historical Charts of Speculative Positioning
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EURUSD - Speculative positioning in the EUR/USD flipped to net short in October and has remained unchanged since then, according to a sample of our proprietary customer flow information. At the time of the publication of this report, the ratio of longs to shorts is negative 1.35 as 57.5% of the currently open orders are short. Long orders are 2.5% lower than yesterday and 1.4% stronger since last week. Short orders are 1.1% higher than yesterday and 1.5% stronger since last week. Open interest is 0.4% weaker than yesterday and 16.6% above its monthly average. Looking ahead, the contrarian nature of the indicator continues to favor the euro against the US dollar but further gains could be limited since the ratio of longs to shorts is very close to parity.
GBPUSD - Speculative positioning in the Sterling has remained net short for most of the last five months but recently the ratio has been growing less net short. The ratio of longs to shorts in the sterling stands at -1.24 as 55.3% of the currently open orders are short. Long orders are 2.2% higher than yesterday and 32% stronger since last week. Short orders are 6.4% higher than yesterday and 0.9% weaker since last week. Open interest is 4.5% stronger than yesterday and 12.9% 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 61.9% of the currently open orders are long. Long orders are 2.5% higher than yesterday and 1.0% stronger since last week. Short orders are 3.0% higher than yesterday and 10.4% stronger since last week. Open interest is 2.7% stronger than yesterday and 32.1% above its monthly average. Looking ahead, the Swiss franc SSI continues to confirm EUR/USD strength and signals further USDCHF weakness.
USDJPY Last week, most of our speculative traders profited from the carry trade unwind and during this week many preferred to take profits ahead of the NFP risk event. In fact, short orders are 11% lower than yesterday and 21.2% weaker since last week. Long orders are 2.3% lower than yesterday and 14.2% weaker since last week. Open interest is 7.2% weaker than yesterday and 1.2% above its monthly average. Still, the ratio of longs to shorts remains negative as 53.8% of the currently open orders are short. Looking ahead, the SSI signals USDJPY strength but like the EUR/USD ratio suggests, further gains could be limited since the ratio is very close to parity.
USDCAD - The ratio of longs to shorts is -1.16 as 53.8% of the currently open orders are short. Long orders are 2.3% lower than yesterday and 14.2% weaker since last week. Short orders are 11.0% lower than yesterday and 21.2% weaker since last week. Open interest is 7.2% weaker than yesterday and 1.2% above its monthly average. Speculative sentiment has remained mostly net long since May 2005 and as a result of that the SSI continues to signal USDCAD weakness in the week ahead.
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