EURUSD – Euro Forecast Neutral on Unclear Forex Sentiment
USDJPY – Japanese Yen to Fall Further on One-sided Trading
GBPUSD – British Pound Bias Remains Weakly Bearish
USDCHF – US Dollar/Swiss Franc Forecast to Rally
USDCAD – Canadian Dollar Bias Bearish Against US Dollar
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 – Forex trading sentiment has been extremely choppy in the EUR/USD, as directionless price action does not often produce sentiment extremes. Indeed, the ratio of long to short positions in the EUR/USD stands at a relatively neutral 1.06 on 51 percent of traders being long. Yesterday the ratio stood at -1.12 as 53 percent of open positions were short. Long positions are 27.5% higher than yesterday and 48.2% stronger since last week. Short positions are 7.9% higher than yesterday and 39.9% stronger since last week. The sharp overnight jump in EUR/USD long positions gives us a marginally bearish contrarian bias, but choppy price action lends very little conviction to our bias. Our sentiment-based forex trading signals are accordingly weakly short the EUR/USD.
USDJPY – Our contrarian forex trading strategies remain long the USD/JPY, as forex sentiment has increasingly pointed to further rallies. Indeed, the forex trading crowd remains net-short the currency pair; only 47 percent of traders are currently long. Yesterday we saw that 55 percent of open positions were long, but a 79.8 percent surge in short positions clearly shows that sentiment has turned. Long positions, by comparison, are only 29.6 percent higher overnight. When price is trending higher and the crowd continues to sell into rallies, our Speculative Sentiment Index gives a contrarian signal to continue buying into price advances.
GBPUSD – Sharp one-sided trader sentiment has left our forex trading strategies heavily short the GBP/USD. Indeed, a sharp 41.0 percent jump in GBP/USD-long positions means that 55 percent traders are currently long the currency pair. Yesterday, positioning was almost exactly neutral as 50 percent of traders were long. Under normal circumstances, we would take a strongly bearish bias on the GBP/USD based on increasingly one-sided sentiment. Yet recently choppy price action gives us reason to believe that we may continue to see the GBP trade within a narrowing range against the US Dollar.
USDCHF – The ratio of long to short positions in the USDCHF stands at -1.04 as nearly 51% of traders are short. Yesterday, the ratio was at 1.35 as 57% of open positions were long. In detail, long positions are 3.7% lower than yesterday and 19.8% stronger since last week. Short positions are 35.7% higher than yesterday and 34.6% stronger since last week. Open interest is 13.1% stronger than yesterday and 6.5% below its monthly average. The SSI is a contrarian indicator and signals more USDCHF gains. Our forex trading signals are accordingly long the USD/CHF.
USDCAD – The ratio of long to short positions in the USDCAD stands at 1.11 as nearly 53% of traders are long. Yesterday, the ratio was at 1.11 as 53% of open positions were long. In detail, long positions are 1.2% higher than yesterday and 23.6% stronger since last week. Short positions are 0.4% higher than yesterday and 20.8% stronger since last week. Open interest is 0.8% stronger than yesterday and 11.7% below its monthly average. The SSI is a contrarian indicator and signals more USDCAD losses. The SSI is a contrarian indicator and signals more USDCAD gains. Tell us and other traders what you think in our forex forum.
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.
Have any further questions about the SSI and forex positioning data? Ask the author David Rodríguez on our forex forum.
We love getting feedback on our reports. Tell us how we’re doing: E-mail the author of this report at drodriguez@dailyfx.com.
For information on an FXCM Managed Account that takes advantage of the SSI, please review our Sentiment Program at: http://www.fxcmmanagedaccounts.com/ or call +1 646-432-2968.
