[I][B]EURUSD -[/B] Long Positions in the Euro Grew By Nearly 40 percent
[B]GBPUSD -[/B] Positions Outstanding Fall By 10 Percent on Protective Stops Liquidation
[B]USDJPY -[/B] The SSI is as a contrarian indicator and gives us a strong signal to sell USDJPY
[B]USDCHF -[/B] 81 Percent of traders remain long USDCHF
[B]USDCAD -[/B] Open interest is 4.3 percent below its monthly average
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[B]EURUSD -[/B] The ratio of long to short positions in the EURUSD stands at -1.63 as nearly 62% of traders are short. However, since last week retail has been buying the EURUSD (long positions are up by 39.6%). 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. As a result, the SSI gives us a medium strength signal to buy euros against the dollar.
[B]GBPUSD -[/B] The ratio of long to short positions in the GBPUSD stands at -1.82 as nearly 65% of traders are short. Yesterday, the ratio was at -1.79 as 64% of open positions were short. In detail, long positions are 4.0% lower than yesterday and 12.5% weaker since last week. Short positions are 2.6% lower than yesterday and 9.3% weaker since last week. Open interest is 3.1% weaker than yesterday and 8.6% below its monthly average. The SSI is a contrarian indicator and signals more GBPUSD gains.
[B]USDCHF -[/B] 81% of retail traders are long dollars (long to short ratio is 4.33). However, retail has been selling the USDCHF (short positions are up by 17.7% since last week). When retail is long but reduces its exposure, the long term direction remains down but the market might have some upside in the short term.
[B]USDJPY -[/B] The ratio of long to short positions in the USDJPY stands close to 2.50 as nearly 71% of traders are long. In detail, long positions are 6.5% higher than yesterday and 22.3% stronger since last week. Short positions are 20.6% lower than yesterday and 30.0% weaker since last week. Open interest is 3.0% weaker than yesterday and 4.0% above its monthly average. In the past, when retail was long and buying more, the USDJPY has sold off in the following days. The SSI gives us a strong signal to sell USDJPY.
[B]USDCAD -[/B] The ratio of long to short positions in the USDCAD stands at 3.32 as nearly 77% of traders are long. Yesterday, the ratio was at 3.92 as 80% of open positions were long. In detail, long positions are 7.0% lower than yesterday and 11.6% weaker since last week. Short positions are 9.8% higher than yesterday and 13.6% stronger since last week. Open interest is 3.6% weaker than yesterday and 4.3% below its monthly average. The SSI is a contrarian indicator and signals more USDCAD losses.
[B]How to Interpret the SSI?[/B] 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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