Currently, none of the DailyFX PLUS Trading Signals has an open position in EUR/USD. That makes sense given the mixed signals from the Speculative Sentiment Index (SSI):
The ratio of long to short positions in the EUR/USD stands at -2.55 as only 28% of traders are long. On it’s own that’s a bullish signal for the pair, since SSI is a contrarian indicator.
However, it’s important to note that long positions are 16.5% higher than yesterday, and short positions are 8.7% lower. That indicates traders are buying into EUR/USD weakness and as a result, the crowd has grown less net-short from yesterday.
If anything, that’s a sign that EUR/USD is more likely to decline further in the short term, but could resume it’s uptrend after this short term retracement. Traders with a bullish bias might want to wait for signs of support before going long.
It’s Thursday which means the weekly update of the Speculative Sentiment Index (SSI) was posted today on DailyFX.com
The strongest bullish signals are for EUR/USD and GBP/USD which means it’s no surprise that the SSI-based Momentum2 and Breakout2 strategies are currently giving signals to buy these pairs.
You can automate both strategies on your FXCM account via the Mirror Trader platform. The same login and password you use on Trading Station will allow you to access Mirror Trader.
“Retail forex trading crowds have never been more long the US Dollar versus the British Pound and other currency counterparts. We see material risk of a significant Dollar turnaround.”
Weekly Summary of Forex Trader Sentiment and Changes in Positioning
That was the assessment of quantitative strategist David Rodriguez upon the release of the latest weekly update of our Speculative Sentiment Index (SSI) today on DailyFX.com
As Rodriguez discusses in the following video, “Dollar reversal risk especially high in the GBP/USD, EUR/USD and USD/CHF”.
The US Dollar continues to coil up for its next move versus the Euro and other counterparts. But how might we trade it? In this video, DailyFX quantitative strategist David Rodriguez discusses what he’s watching.
[I]Key Points[/I]
[ul]
[li]Dollar trades at important resistance as markets remain uncertain
[/li][li]Forex cycle studies suggest the middle of the week is critical for the EURUSD
[/li][li]US Dollar coiling up for a big move, but we need to see confirmation before trading it
[/li][/ul]
DailyFX analyst David Song discusses the risk for a larger correction in USD/JPY in his Daily Dollar segment:
Talking Points:
[ul][li]USDOLLAR Retains Bearish Momentum; Lower High in Place?
[/li][li]Japanese Yen Benefits From Risk Aversion; At Risk for Larger Correction[/ul]
[/li]
Two trading strategies based on the Speculative Sentiment Index (SSI) - Breakout2 and Momentum2 - are currently giving signals to short USD/JPY at current levels.
Both of these DailyFX PLUS Trading Signals can be automated on your FXCM account via the Mirror Trader platform. Your Trading Station username and password can be used to access Mirror Trader.
Highlights:
[ul]
[li]Retail forex traders have never been more long the US Dollar versus major counterparts
[/li][li]A break in key price levels alongside sentiment extremes points to big FX moves
[/li][li]Our focus remains on Dollar versus European pairs and the New Zealand Dollar
[/li][/ul]
Weekly Summary of Forex Trader Sentiment and Changes in Positioning
FX trading crowds have never been more long the US Dollar versus the Euro or New Zealand Dollar.
Trade Implications – EURUSD: The fact that crowds continue selling into Euro strength suggests the EURUSD may continue higher. Yet the chart below will show that traders are often their most short at the top; how do we trade?
Two of our SSI-based trading strategies (Breakout2 and Momentum2) are currently giving signals to buy EUR/USD. Both signals are can be automated on your FXCM account via the Mirror Trader platform.
[I]Talking points in this video:[/I]
[ul]
[li]The market is fully pricing in expectations of a 25 bp rate hike from the RBNZ to 2.75%
[/li][li]While the rate move is important, the trend is likely to be decided by forecasts for future hikes
[/li][li]NZD/USD is wedged into a breakout pattern between 0.8500 and 0.8400 awaiting a spark
[/li][li]The Breakout2 strategy on Mirror Trader can be used to signal or confirm trade setups
[/li][/ul]
Retail traders have bought aggressively into recent Gold price declines versus the US Dollar. Notice how in the image below the Speculative Sentiment Index (SSI) flipped from being negative (brown bars mean traders are net short) to being positive (green bars mean traders are net long).
This important shift in sentiment suggests that the XAU/USD exchange rate likely set an important peak. The majority of traders had turned short Gold as it crossed above the $1275 level, so that could possibly act as a price target to the downside now.
The Australian Dollar trades at critical trendline and moving average resistance versus the US Dollar, but key correlations suggest it will run out of steam.
View the following forex correlations to the S&P 500, S&P Volatility Index (VIX), Crude Oil Futures prices, US Treasury Yields, and Spot Gold prices.
