EURUSD – Euro Outlook Remains Bearish Against US Dollar
USDJPY – Japanese Yen Forecast Unclear on Hold of Major Trendline
GBPUSD – Forex Systems Sell the British Pound Against US Dollar
USDCHF – Swiss Franc Forecast Mixed Against Major Counterparts
USDCAD – Canadian Dollar Forecast Abruptly Shifts on Sizeable Declines
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 sold the Euro against the US Dollar through recent declines, but a more recent bounce leaves our algorithmic trading systems flat the EUR/USD. The ratio of long to short positions in the EURUSD stands at 1.10 as nearly 52% of traders are long. Yesterday, the ratio was at 1.12 as 53% of open positions were long. In detail, long positions are 0.1% lower than yesterday and 9.1% stronger since last week. Short positions are 1.9% higher than yesterday and 19.3% stronger since last week. Open interest is 0.8% stronger than yesterday and 15.0% above its monthly average. The SSI is a contrarian indicator and signals more EURUSD losses. Yet the strength of the bearish contrarian signal has clearly faded on the recent EUR/USD bounce, and we have little conviction in our calls for Euro declines through the near term.
USDJPY – Our contrarian forex trading strategies remain short the US Dollar against the Japanese Yen, as forex sentiment highlights risks of further USD/JPY weakness. The ratio of long to short positions in the USDJPY stands at 1.27 as nearly 56% of traders are long. Yesterday, the ratio was at 1.12 as 53% of open positions were long. In detail, long positions are 4.8% higher than yesterday and 23.0% stronger since last week. Short positions are 7.6% lower than yesterday and 21.9% stronger since last week. Open interest is 1.1% weaker than yesterday and 17.2% above its monthly average. The SSI is a contrarian indicator and gives us reason to expect further USD/JPY losses. Yet we would ideally see the headline ratio reach further extremes before taking an aggressively bearish position through short-term trading.
GBPUSD –Our forex trading strategies have recently sold the British Pound against the US Dollar—a clear shift from their previously bullish stance. Last week we aggressively called for British Pound advances on extreme contrarian sentiment, but a clear shift in positioning has forced us to take a commensurate shift in biases. The ratio of long to short positions in the GBPUSD stands at -1.10 as nearly 52% of traders are short. Yesterday, the ratio was at -1.00 as 50% of open positions were short. In detail, long positions are 3.4% lower than yesterday and 22.0% stronger since last week. Short positions are 6.3% higher than yesterday and 46.7% stronger since last week. Open interest is 1.4% stronger than yesterday and 44.9% above its monthly average. The SSI is a contrarian indicator and now gives weak forecast for short-term gains. Yet the fairly neutral positioning ratio gives us little confidence in short-term direction.
USDCHF –The ratio of long to short positions in the USDCHF stands at -1.01 as positioning is very near neutral. Yesterday, the ratio was at -1.63 as 62% of open positions were short. In detail, long positions are 17.1% higher than yesterday and 3.9% weaker since last week. Short positions are 27.6% lower than yesterday and 27.0% stronger since last week. Open interest is 10.6% weaker than yesterday and 20.1% above its monthly average. The SSI is a contrarian indicator and signals more USDCHF gains. Yet the extreme choppiness in market sentiment has made for challenging forecasting conditions through recent trade.
USDCAD – Our forex trading signals remain effectively neutral the US Dollar/Canadian Dollar pair—a clear shift from an aggressively bearish stance seen last week. In our previous report, we aggressively called for Canadian Dollar appreciation versus its US namesake. An abrupt swing in market sentiment clearly made our forecasts grossly inaccurate, and choppy trading conditions make it extremely difficult to establish a firm USD/CAD bias. The ratio of long to short positions in the USDCAD stands at 1.13 as nearly 53% of traders are long. Yesterday, the ratio was at 1.04 as 51% of open positions were long. In detail, long positions are 6.7% higher than yesterday and 20.7% weaker since last week. Short positions are 1.6% lower than yesterday and 8.8% stronger since last week. Open interest is 2.7% stronger than yesterday and 3.8% above its monthly average. A near-neutral SSI ratio gives us little direction in the USD/CAD pair.
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.
