Forex traders continue selling US dollars against the Euro, British Pound, Swiss Franc, and Japanese Yen. Yet FXCM Speculative Sentiment Index track records clearly show that this provides signal to buy the downtrodden US currency through upcoming trade. Our Currency Trading Signals Outlook suggests that we may see the SSI continue to outperform as a strategy–giving us increased confidence in its US dollar buy recommendation.
EURUSD – Forex Traders Forecast Euro Losses
GBPUSD – British Pound Trading Signals Sentiment Extreme
USDJPY – Currency Traders Sell US Dollars Against Yen
USDCHF – Trading Signals Prove Accurate with FXCM SSI
USDCAD – Canadian Dollar Traders Perfectly Predict USDCAD Breakout
While the SSI is available once a week on DailyFX.com, you can receive SSI readings twice a day in DailyFX Plus Forex Intraday Analysis
The SSI sought a EURUSD rally since 1.26 and was signaling a reversal around 1.60. Find our more in the DailyFX Forex Forum
EURUSD – Forex traders continue to buy the euro according to proprietary currency trading data, and we see the EURUSD continue to tumble through recent trade. The ratio of long to short positions in the EURUSD stands at 2.03 as nearly 67% of traders are long. In fact, EURUSD long positions are now 45.3 percent higher than last week—compared with a 35.3 percent weekly drop in euro short positioning. The Speculative Sentiment Index is a contrarian indicator and it continues to signal further EURUSD losses. Our technical analyst believes that the EURUSD will continue to decline; visit his Euro Technical Outlook.
GBPUSD – Currency traders continue buying the British Pound, and the currency continues to see significant drops against the US dollar. The ratio of long to short positions in the GBPUSD stands at 2.04 as nearly 67% of traders are long. We see similar forex position changes in the GBPUSD as we did in the EURUSD; long positions have gained an incredible 80.6 while shorts have fallen 12.2 percent. Given that the SSI tends to be a strong contrarian signal in trending markets, the current reading tells us that we may look to sell the GBPUSD through upcoming trading. Read our British Pound Technical Outlook for a slightly different opinion.
USDJPY – The USDJPY SSI reading gave a signal to go long the pair at 105, and the US dollar has gone on to gain over 400 pips in less than a month. The ratio of long to short positions in the USDJPY stands at -1.82 as nearly 65% of traders are short. Today’s reading is a good deal more extreme than what we saw last week; long positions fell 19.9 percent while shorts gained 8.6 percent. All the while, open interest on the USDJPY now stands 7.9 percent above its monthly average. Forex positioning gives us signal that the USDJPY may continue to gain through the short term. Visit our Japanese Yen Technical Outlook for more.
USDCHF – Our SSI currency trading signals forecasted that the USDCHF would gain as of the middle of July. The pair has since rallied over 400 pips—confirming the accuracy of the SSI’s contrarian trading signals. The ratio of long to short positions in the USDCHF currently stands at -1.60 as nearly 62% of traders are short. Since last week, short positions have actually gained 34.1 percent and long positions have fallen by 22.8 percent. Given continued willingness to sell USDCHF rallies, the SSI suggests that we should actually look to buy dips in the USDCHF through the short term. See all Swiss Franc technical and fundamental analysis in our currency rooms.
USDCAD – If ever there were any doubt in the SSI’s ability to predict price moves, recent USDCAD price action would quickly dispel it. The US Dollar/Canadian Dollar SSI reading flipped to negative for the first time in over two years on the day that the USDCAD broke out of its multi-month range. The ratio of long to short positions in the USDCAD stands at -1.19 as nearly 54% of traders are short. Since last week, forex traders have actually increased short positions by a whopping 49.9 percent and cut longs by 7.7 percent. Given that traders show little willingness to cease selling the USDCAD, the SSI predicts that we may see more US dollar gains/Canadian dollar losses through short term trading. Visit our Canadian Dollar Forex Forum thread to give us your opinion on the currency.
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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