EURUSD – Euro Forecast to Rally Further against US Dollar
GBPUSD – British Pound May Have Topped on Sentiment Shift
USDCHF – Swiss Franc Expected to Rally Further Versus US Dollar
USDCAD – Canadian Dollar Forecast Remains Bullish Against US Dollar
USDJPY – Japanese Yen Outlook Remains Positive on Forex Positioning
While the SSI is available once a week on DailyFX.com, you can receive SSI readings twice a day in DailyFX Plus Forex Intraday Trading Signals
The SSI sought a EURUSD rally since 1.26 and was signaling a reversal around 1.60. Find our more in the DailyFX Forex Forum
Historical Charts of Speculative Forex Trading Positioning
EURUSD – Our forex trading signals remains aggressively long the Euro against the US Dollar, and extreme forex sentiment suggests the rally is not yet over. The ratio of long to short positions in the EURUSD stands at -1.67 as nearly 63% of traders are short. Yesterday, the ratio was at -1.73 as 63% of open positions were short. In detail, long positions are 5.5% higher than yesterday and 16.6% weaker since last week. Short positions are 1.6% higher than yesterday and 14.1% weaker since last week. Long positions are beginning to gain traction, but shorts continue to outnumber longs by a healthy margin. Absent a stronger shift in positioning, the SSI projects further EUR/USD gains.
GBPUSD –Our forex trading strategies bought the British Pound against the US Dollar in near-unison, with 3 separate systems remaining long until the most recent pullback. As it stands, two systems remain long while one has closed out at a respectable profit. It seems that the most recent shift in sentiment points to a potential turnaround in the high-flying pair. The ratio of long to short positions in the GBPUSD stands at -1.67 as nearly 63% of traders are short. Yesterday, the ratio was at -2.80 as 74% of open positions were short. In detail, long positions are 13.1% higher than yesterday and 20.9% weaker since last week. Short positions are 32.3% lower than yesterday and 21.1% weaker since last week. The sharp drop in short orders gives early signal that the GBP/USD may in fact be topping, and as such our forecast remains neutral-to-bearish through time of writing.
USDJPY – Our contrarian forex trading strategies have sold into USD/JPY weakness, as 2 of 6 trading systems remain short through recent price action. The ratio of long to short positions in the USDJPY stands at an impressive 2.21 as nearly 69% of traders are long. Yesterday, the ratio was at 2.19 as approximately 69% of open positions were long. In detail, long positions are 3.2% higher than yesterday and 13.4% weaker since last week. Short positions are 2.1% higher than yesterday and 21.4% weaker since last week. As long as forex crowds remain excessively long the US Dollar against the Japanese Yen, we forecast further currency pair losses.
USDCHF – Our forex trading strategies have aggressively sold into USD/CHF weakness, as one-sided sentiment suggests further losses are likely. The ratio of long to short positions in the USDCHF stands at 2.53 as nearly 72% of traders are long. Yesterday, the ratio was at 2.58 as 72% of open positions were long. In detail, long positions are 2.0% higher than yesterday and 6.5% weaker since last week. Short positions are 4.0% higher than yesterday and 3.6% stronger since last week. The SSI is a contrarian indicator and signals more USDCHF losses.
USDCAD – Our forex trading signals remain very short the USD/CAD, as extreme forex sentiment points to further losses. The ratio of long to short positions in the USDCAD stands at 2.02 as nearly 67% of traders are long. Yesterday, the ratio was at 2.26 as 69% of open positions were long. In detail, long positions are 5.0% lower than yesterday and 2.2% weaker since last week. Short positions are 5.8% higher than yesterday and 2.6% stronger since last week. The marginal pullback in long orders and uptick in short orders somewhat moderates our bearish bias, but the extreme headline SSI figure predicts further losses are likely.
How do we 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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Have any further questions about the SSI and forex positioning data? Ask the author David Rodríguez on our forex forum.
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