EURUSD - Positions outstanding fall nearly 8 percent on profit taking
GBPUSD - The ratio of shorts to long positions stands at 1.56
USDJPY - Short positions are up 32 percent since last week
USDCHF - 79 percent of retail traders have long positions in the US dollar
USDCAD - Open interest remains 4.1 percent below its monthly average
EURUSD - The ratio of long to short positions in the EURUSD stands at -1.46 as nearly 59% of traders are short. However, during this week retail traders have been buying the EURUSD (long positions are up by 4.1% since last week). When retail is short but reduces its exposure, the long term direction remains bullish but the market might have some downside in the short term. Short positions are 0.7% lower than yesterday and 14.3% weaker since last week. Open interest is 2.9% stronger than yesterday and 5.3% below its monthly average. The SSI gives us a medium strength signal to buy EURUSD.
GBPUSD - The ratio of long to short positions in the GBPUSD stands at -1.56 as nearly 61% of traders are short. Yesterday, the ratio was at -1.64 as 62% of open positions were short. In detail, long positions are 11.8% higher than yesterday and 11.5% stronger since last week. Short positions are 6.5% higher than yesterday and 7.2% weaker since last week. Open interest is 8.5% stronger than yesterday and 8.9% below its monthly average. The SSI is a contrarian indicator and signals more GBPUSD gains.
USDCHF - The ratio of long to short positions in the USDCHF stands at 3.70 as nearly 79% of traders are long. Yesterday, the ratio was at 4.79 as 83% of open positions were long. In detail, long positions are 3.3% lower than yesterday and 3.7% weaker since last week. Short positions are 25.4% higher than yesterday and 36.0% stronger since last week. Open interest is 1.6% stronger than yesterday and 2.1% above its monthly average. The SSI is a contrarian indicator and signals more USDCHF losses.
USDJPY - The ratio of long to short positions in the USDJPY stands at 1.86 as nearly 65% of traders are long. Yesterday, the ratio was at 1.91 as 66% of open positions were long. In detail, long positions are 0.1% higher than yesterday and 15.1% weaker since last week. Short positions are 2.9% higher than yesterday and 31.8% stronger since last week. Open interest is 1.1% stronger than yesterday and 1.7% above its monthly average. The SSI is a contrarian indicator and signals more USDJPY losses.
USDCAD - The ratio of long to short positions in the USDCAD stands at 2.63 as nearly 72% of traders are long. Yesterday, the ratio was at 2.63 as 72% of open positions were long. In detail, long positions are 3.8% higher than yesterday and 2.2% weaker since last week. Short positions are 3.8% higher than yesterday and 12.5% stronger since last week. Open interest is 3.8% stronger than yesterday and 4.1% below its monthly average. The SSI is a contrarian indicator and signals more USDCAD losses.
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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