Retail Forex traders continue to fight the EURUSD’s record-breaking rally, suggesting the euro has further to advance. Though the pair recently surged through the next market-worthy milestone at 1.5500, the Speculative Sentiment Index ratio still stands at -1.63 with 62 percent of traders attempting to call a top with short positions. For perspective, today’s ratio is only slightly less extreme than last week’s -1.68 reading. On the other hand, the recent reading stands in more distinct contrast to the -2.20 read before yesterday’s breakout.
[I][B]• EURUSD – Retail Traders Still Fighting Euro Advance, Upside Still Open
• GBPUSD – Pound Sees Modest Changes In Positioning Despite Rally
• USDJPY – Speculators Confident In Yen Resistance At 100
• USDCHF – Swiss Franc Positioning Diverges From Yen, Potential Reversal
• USDCAD –Canadian Dollar Sees Modest Changes In Positioning[/B][/I]
[I]The SSI has been calling for a rally in the EURUSD since the pair was trading at 1.26. Find our more in the DailyFX Forum.[/I]
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* Negative ratio indicates net short
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Historical Charts of Speculative Positioning[/B]
[B]EURUSD – [/B]Retail Forex traders continue to fight the EURUSD’s record-breaking rally, suggesting the euro has further to advance. Though the pair recently surged through the next market-worthy milestone at 1.5500, the Speculative Sentiment Index ratio still stands at -1.63 with 62 percent of traders attempting to call a top with short positions. For perspective, today’s ratio is only slightly less extreme than last week’s -1.68 reading. On the other hand, the recent reading stands in more distinct contrast to the -2.20 read before yesterday’s breakout. Looking into the details, it seems that retail traders may be slowly coming to terms with the dollar’s weakness as open interest is only 1.8% greater than last Thursday and 14.6% above the monthly average. What’s more, long positions have jumped 24% since Wednesday’s break and are 14.5% stronger than last week. Shorts are down 8.3% from yesterday and 4.4% from last week.
[I]Learn more about where the EUR/USD is headed in the Euro currency room.[/I]
[B]GBPUSD – [/B]Though the contrarian sentiment reading for GBPUSD hasn’t been as strong as the EURUSD, the SSI has kept us on the right side of the pound’s advance. Since pushing through 2.00 last week, the pair has advanced rather quickly to test 2.04. Through this move, the ratio has changed little with a current -1.06 reading that compares to -1.09 from Wednesday and -1.08 last week. With the pound’s recent strength, long positions have grown 5.2% from yesterday and 18.8% from last Thursday. However, short positioning has built with comparable strength by rising 2.5% from yesterday and 19.6% over last week. Overall, open interest has been relatively steady with net positions up 3.8% over Wednesday and 9.3% above its monthly average.
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Read more about the GBP/USD in the British Pound currency room.[/I]
[B]USDJPY – [/B]Retail positioning in the USDJPY is growing extreme. With the steady decline finally bringing the pair to the intervention-prone 100 level, the ratio has shot up to 2.46 with 71% of traders holding long positions. This is a jump from the 1.98 and 1.96 readings from yesterday and last week respectively. The details highlight the shift in positioning. Long trades have jumped 12.9% from yesterday and are a sharp 39.0% greater than last week. At the same time, profitable bears have cut their exposure to further downside momentum with shorts 8.9% fewer than yesterday and 16.5% weaker than last week. Despite the significance of the 100-level, open interest is only 5.6% stronger than yesterday and 29.8% above its monthly average. Considering the SSI is a contrarian indicator, the USDJPY’s extreme positioning points to an eventual break to the downside.
[I]Stay ahead by visiting the Yen currency room.[/I]
[B]USDCHF – [/B]Though USDCHF is in the same boat as USDJPY as a risk sentiment gauge, positioning between the two pairs has diverged considerably over the past week. While USDJPY longs have built up substantially on supposed support, retail traders seem to have been swept up by the current that is driving spot towards parity. The SSI ratio flipped to a net negative reading at -1.14 with 53% of speculative traders short. Today’s reading compares to the 1.02 reading from yesterday and 1.11 from last week. Open interest has grown 6.8% from Wednesday and 18.8% over the past week, suggesting this flip has garnered greater validity. Taking responsibility for the shift, shorts jumped 14.9% from yesterday and a staggering 66.7% from last Thursday. Long positions were 1.1% weaker than yesterday and 5.3% than last week. Since the SSI is a contrarian read, this flip implies a USDCHF reversal is at home.
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For additional information about the USD/CHF, check out the Swiss Franc currency room.[/I]
[B]USDCAD – [/B]For yet another week, USDCAD has bucked the dollar-selloff seen across the market for congestive price action. Positioning remains considerably net long with a ratio of 2.19, which is unchanged from yesterday’s reading and weaker than the 2.35 figure from last week. The lack of activity from the currency pair has clearly garnered little interest in a market where everything is seemingly moving. Open interest was only 0.1% above yesterday and is actually 3.3% below its monthly average. Long positions have edged 0.1% higher from Wednesday and 4.9% weaker than yesterday. Shorts were unchanged from yesterday and 2.8% weaker than last week. Despite the few changes in positioning this week, the contrarian quality of the SSI is still looking for a drop in USDCAD.
[I] Visit the Canadian dollar currency room for additional resources.[/I]
[I][B]Written by John Kicklighter, Currency Analyst for DailyFX.com[/B][/I]
Have comments or questions on this or other articles authored by John? E-mail him at <[email protected]>.
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[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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[B]For information on an FXCM Managed Account that takes advantage of the SSI, [/B]please review our Sentiment Program at: [U]Portal - FXCM.com or call +1 646-432-2968.