The Speculative Sentiment Index has kept us on the right side of the market for the EURUSD’s momentous break above 1.50 this past week. Despite the pair’s break to record highs and its move beyond the closely watched milestone, however, retail positioning remains net short – pointing to further follow through. The ratio of long to short positions was slightly more extreme at -1.81 than last week’s -1.79. On the other hand, the ratio has pulled back from the -2.29 reading from Tuesday – before the euro forced its break. Taking a look at the details, EURUSD longs are 13.1% higher than yesterday and 19.2% greater than the same time a week ago. Short positions are 5.8% higher than last week and down 0.4% from yesterday. Open interest, in spite of the sharp rally, is only 4.0% stronger than yesterday and 16.5% above its monthly average.
[I][B]· EURUSD – Short Positioning Holds Despite The 1.50 Breech, Pointing To Further Rallying
· GBPUSD – Pound Flip Coincides With Rally, Reading Still Not Extreme
· USDJPY – Yen Open Interest Soars As Spot Approaches 105
· USDCHF – A Major Rally And Record Highs Do Little To Speculative Franc Positioning
· USDCAD – Canadian Dollar Looking For Further Advances As Retailers Remain Short[/B][/I]
[I]We have been calling for a rally in the EURUSD since the pair was trading at 1.26. Find our more in the DailyFX Forum.[/I]
[B]Currency[/B] [B]Last Week[/B] [B]Present*[/B] [B]% Long[/B] [B]% Change in Positions Outstanding[/B] [B]Signal[/B] EUR/USD -1.79 [B]-1.81[/B] 35% 10.10% Bullish GBP/USD 1.01 [B]-1.09[/B] 48% 20.34% Bullish USD/JPY 1.86 [B]2.18[/B] 69% 49.62% Bearish USD/CHF 1.66 [B]1.66[/B] 63% 41.29% Bearish USD/CAD 1.93 [B]2.66[/B] 73% 0.40% Bearish
* Negative ratio indicates net short
[B]Historical Charts of Speculative Positioning[/B]
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[B]EURUSD – [/B]The Speculative Sentiment Index has kept us on the right side of the market for the EURUSD’s momentous break above 1.50 this past week. Despite the pair’s break to record highs and its move beyond the closely watched milestone, however, retail positioning remains net short – pointing to further follow through. The ratio of long to short positions was slightly more extreme at -1.81 than last week’s -1.79. On the other hand, the ratio has pulled back from the -2.29 reading from Tuesday – before the euro forced its break. Taking a look at the details, EURUSD longs are 13.1% higher than yesterday and 19.2% greater than the same time a week ago. Short positions are 5.8% higher than last week and down 0.4% from yesterday. Open interest, in spite of the sharp rally, is only 4.0% stronger than yesterday and 16.5% above its monthly average.
[B]GBPUSD – [/B]Looking back to the near split in pound positioning last week, it seems obvious that speculative sentiment was foreshadowing a significant change in from GBPUSD. Ultimately this flip would coincide with the break of a three-month, falling trend channel and subsequent rally that fell just short of 2.00. The SSI ratio now stands at -1.09 – not yet an extreme to confirm expectations of strong follow through. From the details, we can see that long positions are 9.0% lower than yesterday but 14.1% stronger than last week. Shorts are 2.1% greater than Wednesday and 26.4% greater than a week ago. Open interest is only 3.5% above where it stood yesterday and is 15.5% beyond its monthly average.
[B]USDJPY – [/B]Retail speculative positioning in USDJPY intensified over the past week. The break of a short-term rising trend channel and spots approach of 105 has led the SSI ratio to rise from 1.86 last week to 2.18. This puts nearly 69% of retail traders in our sample in long trades, up from 65% from last week. Looking into the details, the proximity of multi-year lows may be leading the speculative crowd to believe a major market move is underway. Open interest is 6.9% stronger than yesterday and 35.2% above the monthly average. In spite of the break to the downside, long positions jumped 12.7% from yesterday and are 46.3% higher than last Thursday. Short trades, on the other hand, are 3.9% lower than Wednesday and 30.8% stronger than last week.
[I]Check out the new technicals for the USD/JPY.[/I]
[B]USDCHF – [/B]Over the past week, the Swiss franc has broke to record highs against the dollar and has posted the largest rally against the greenback (behind only the Canadian dollar) of the majors. In response to this significant shift in the market, however, Speculative Sentiment Index ratio remains unchanged from the 1.66 reading reported a week ago. On the other hand, there has been a considerable pick up in overall positioning. Open interest is 9.3% higher than yesterday and 24.4% above its monthly average. At the same time, long positions have risen 6.6% from Wednesday and 46.3% from last week. Short trades have grown 14% from yesterday and 34.1% from last Thursday.
[B]USDCAD – [/B]Joining many other majors who have produced anti-dollar breakouts in the past few days, USDCAD made its mark by dropping below the support at 0.99 and momentum hasn’t really cooled since then. The SSI ratio stands at 2.66 with nearly 73% of retail traders long. This compares to a 2.63 reading yesterday and a 1.93 print last week. From yesterday longs are 0.5% higher than Wednesday and 12.9% above where there were a week ago. Short positions, down 0.4%, are little changed from yesterday as well. From a week ago, however, shorts have actually plunged 23%. Overall, open interest is only 0.3% higher than yesterday and is only 3.5% above its monthly average.
Have comments or questions on this or other articles authored by John? E-mail him at <[email protected]>.
[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.
[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.