The sentiment extreme among EURUSD retail traders continued to settle through this past week. With positioning coming closer and closer to a flip and open interest tumbling, the euro’s long rally may be coming on its first serious correction in months. The EURUSD’s SSI reading stands at -1.16 compared to -1.47 from last week and -1.65 yesterday during the pair’s sharp 250-point advance. The details further reveal speculators are running out of patience with trying to consistently call a top.
• EURUSD – Euro Positioning And Open Interest May Signal An Impending Flip
• GBPUSD – Pound Ratio Increasingly Supports An Advance
• USDJPY – Yen Positioning Cools For A Second Week
• USDCHF – Longest Period Of Long Swiss Positioning In 17 Months
• USDCAD –Canadian Dollar On The Verge Of A Sentiment Flip
While the SSI is available once a week on DailyFX.com, you can receive SSI readings twice a day in DailyFX-Plus!
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.
* Negative ratio indicates net short
Historical Charts of Speculative Positioning
EURUSD – The sentiment extreme among EURUSD retail traders continued to settle through this past week. With positioning coming closer and closer to a flip and open interest tumbling, the euro’s long rally may be coming on its first serious correction in months. The EURUSD’s SSI reading stands at -1.16 compared to -1.47 from last week and -1.65 yesterday during the pair’s sharp 250-point advance. The details further reveal speculators are running out of patience with trying to consistently call a top. Long positions have grown 11.7% from yesterday and 2.2% from last Thursday. Shorts, on the other hand, have dropped 21.6% since Wednesday and 18.4% from last week. Also interesting is the steady drop in net positioning. Open interest is 9.1% lower than yesterday and nearly 15% weaker than last week. Altogether, the SSI is still pointing to further euro gains, but a flip in sentiment and spot may be close at hand.
GBPUSD – Excess pound volatility has not come with a consistent direction, yet the GBPUSD is one of the few pairs that is seeing positioning growing more extreme over time. The pair’s Speculative Sentiment Index ratio stands at -1.50 compared to the -1.30 reading from last week. From the indicators details, there is a steady building of negative sentiment. Short positions jumped 10.7% from yesterday but are actually 12.0% weaker than they were the same time a week ago. However, long positions have fallen more consistently: down 6.0% from Wednesday and a massive 43.1% weaker than a week ago. Open interest is 13.1% below its monthly average but 3.4% stronger than yesterday.
USDJPY – The Japanese yen has been one of the most active currencies in the FX market over the past six months with the winds of risk whipping up, but speculators interest in staking out a major reversal may be fading. In the past two weeks, USDJPY’s SSI reading has cooled from 2.46 to 2.08 and then to 1.57 today. However, though the index is closing in on parity, open interest has held up. Net positioning is 10.6% above its monthly average even after falling 6.9% from yesterday. In detail, long positions are 16.5% lower than yesterday and 13.9% weaker than a week ago. Shorts jumped 13.7% from yesterday and are 2.3% stronger than last Thursday. Since the SSI is a contrarian indicator, the index points to further USDJPY losses; but like EURUSD, the approach of parity may foreshadow a flip.
USDCHF – Though the USDCHF’s Speculative Sentiment Index reading has been relatively restrained through an accelerated drop to record lows, contrarian retail positioning is nonetheless generating a louder reversal signal. Though the -1.26 reading from today and -1.23 figure from last week are very modest compared to the pair’s positive readings from last summer and fall, the indicator hasn’t seen such consistently negative positioning since October of 2006. The details show that open interest has risen 11.3% stronger than yesterday and 5.7% above its monthly average; but it has also fallen substantially from last week. This is seen more fully in the individual legs of positioning. Longs have grown 4.1% from Wednesday, but have dropped 36.3% over last week. Short positions jumped 17.8% from yesterday and plunged 42.6% through the week.
USDCAD – The USDCAD SSI is fast approaching a flip. From last week’s 1.59, the ratio now stands at 1.45 with 59% of retail speculative traders long. While this reading may be on par for the rest of the majors, it is far removed from 2.0-plus readings from the past few months and the far more extreme readings from last summer and fall. The pair’s long congestion may be the culprit behind the drop in extreme sentiment as open interest is 10.8% below its monthly average. In detail, long positions are 1.2% higher than Wednesday and 6.2% weaker than last week. Similarly mild changes were seen in shorts which fell 4.9% from yesterday and grew 3.7% through the past week.
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Written by John Kicklighter, Currency Analyst for DailyFX.com
Have comments or questions on this or other articles authored by John? E-mail him at jkicklighter@dailyfx.com.
