Latest Release Dated 08/10/06 (10:00 GMT)
EUR/USD EUR/USD Long Positions at Lowest Level Since Dec 2004
GBP/USD Slope of GBP/USD Ratio Heading Back Towards Parity
USD/CHF Carry Prompts Speculators to Remain Mostly Net Long for the Seventh Straight Week
USD/JPY Ratio near Parity, Little Direction from SSI
Historical Charts of Speculative Positioning
The ratio of longs to shorts in the EUR/USD is -1.91, which is within the extreme +/- 3 range. Interestingly enough, net long positions in the EUR/USD has fallen to the lowest levels since December 2004, which was right before the EUR/USD made its turn from its all time high of 1.3667. However the difference between now and then is that in 2004 EUR/USDs rally was clearly becoming overextended and prices had hit an extreme point. Presently, it is merely range bound and far from any meaningful levels. Therefore although we are mindful of what happened in 2004, we side more with the pure SSI signal which is pointing to a resumption of the rally in the EUR/USD. This signal is further confirmed by the fact that the USD/CHF ratio has grown more net long. Over the past week, total positions in the EUR/USD has fallen by 20 percent as longs drop by 48 percent and shorts rise by 10.6 percent.
The ratio of longs to shorts in the GBP/USD is -2.79, which is within the extreme +/- 3 range. Last week we had said that the GBP/USD would likely test 1.90 and that was exactly what unfolded this week with the rally extending to 1.9144. The ratio hit a peak of -6.3 on Friday afternoon and remained at very extreme levels up until this morning. With the slope of the ratio clearly tilting back towards the zero line, even though the ratio is net short in the GBP/USD, a further correction is more likely than a resumption of gains. Over the past week, total positions have remained relatively unchanged by falling only 9.5 percent. Long positions fell by 21 percent while short positions declined by 4.5 percent.
The ratio of longs to shorts in USD/CHF is 2.54, which is within the extreme +/- 3 range. The ratio has grown increasingly net long as USD/CHF continues to remain under pressure. This marks the seventh consecutive week that longs outweighed shorts on our books which is primarily due to the large interest rate spread between the US Dollar and the Swiss franc in the dollars favor. Total positions have fallen by 9.8 percent driven primarily by a reduction in shorts which are down by 33.5 percent. Long positions on the other hand increased 4.9 percent over the past week. The USD/CHF ratio is now giving the same signal as the EUR/USD ratio, which is for a resumption of dollar weakness.
The ratio of longs to shorts in USD/JPY is 1.07, which is within the extreme +/- 3 range and virtually at parity. The USD/JPY ratio has been fluctuating around parity throughout the past week which coincides with the currency pairs tight trading range. There is little that we can garner from the SSI signal at the moment and so we will have to wait for the ratio to pick up in any direction. Total positions have fallen by 23.6 percent over the past week with both bulls and bears cutting exposure. Long positions are down by 20 percent while short positions have decreased 26.7 percent.
