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Forex Trader Sentiment Points to Euro/US Dollar Top
The SSI sought a EURUSD rally since 1.26 and was signaling a reversal around 1.60.
Historical Charts of Speculative Forex Trading Positioning
EURUSD – Our forex trading signals
remain flat the Euro/US Dollar, as unclear trends in FX trader
sentiment make it difficult to discern a strong sentiment-based
forecast. The ratio of long to short positions in the EURUSD stands at
-1.22 as nearly 55% of traders are short. Yesterday, the ratio was at
-1.17 as 54% of open positions were short. In detail, long positions
are 2.6% higher than yesterday and 24.0% stronger since last week.
Short positions are 6.3% higher than yesterday and 7.4% weaker since
last week. The strong weekly gains in long positions suggest the Euro
may have reached a noteworthy top, but our very short-term bias is less
clear on extremely choppy price action.
GBPUSD –Two of our sentiment-based forex trading systems
remain long the British Pound/US Dollar pair, but our SSI forecast is
becoming progressively less bullish. The ratio of long to short
positions in the GBPUSD stands at -1.27 as nearly 56% of traders are
short. Yesterday, the ratio was at -1.46 as 59% of open positions were
short. In detail, long positions are 19.1% higher than yesterday and
25.8% stronger since last week. Short positions are 3.7% higher than
yesterday and 43.4% stronger since last week. The fact that trading
crowds remain net-short the GBP/USD gives us a somewhat bullish
contrarian bias, but we likewise note that long positions have gained
substantially overnight. A continued increase in long positions would
give contrarian bias to go short the currency pair.
USDJPY – Our SSI-based trading systems
remain flat the USDJPY on choppy price action and similarly
unpredictable FX trader sentiment. The ratio of long to short positions
in the USDJPY stands at 1.32 as nearly 57% of traders are long.
Yesterday, the ratio was at 1.19 as 54% of open positions were long. In
detail, long positions are 7.4% higher than yesterday and 7.1% stronger
since last week. Short positions are 3.3% lower than yesterday and 6.6%
stronger since last week. A buildup in long positions gives us a
contrarian bearish bias, but we would ideally wait until sentiment
grows to further extremes before calling for USD/JPY losses.
USDCHF – Our forex sentiment-based trading systems
are short the US Dollar against the Swiss Franc, as trading crowds
remain aggressively long the USDCHF currency pair. The ratio of long to
short positions in the USDCHF stands at 2.18 as nearly 69% of traders
are long. Yesterday, the ratio was at 2.66 as 73% of open positions
were long. In detail, long positions are 4.8% lower than yesterday and
17.0% weaker since last week. Short positions are 15.8% higher than
yesterday and 27.8% stronger since last week. The slow gain in short
orders gives us pause on our ostensibly bearish bias, but a ratio of
long to short orders above 2:1 nonetheless signals further losses are
likely.
USDCAD – Our forex trading signals
remain flat the US Dollar against the Canadian dollar, but an increase
in one-sided trader sentiment could give SSI-based systems the signal
to go short the USDCAD. The ratio of long to short positions in the
USDCAD stands at 1.53 as nearly 60% of traders are long. Yesterday, the
ratio was at 1.41 as 58% of open positions were long. In detail, long
positions are 5.9% higher than yesterday and 7.4% weaker since last
week. Short positions are 2.4% lower than yesterday and 2.9% weaker
since last week. The buildup in long positions gives us contrarian
signal to sell into USDCAD declines.
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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| Category: Forecast | Added by: forex-market (2009-06-11)
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| Views: 545
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