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Main » Articles » Forecast

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. 

SSIA6-11-09

Historical Charts of Speculative Forex Trading Positioning

SSIEUR6-11-09

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.

SSIGBP6-11-09

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.

SSIJPY6-11-09


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.

SSICHF6-11-09

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.

SSICAD6-11-09

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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