| Forex trading crowds have aggressively moved towards buying the US Dollar (ticker: USDOLLAR) against the Euro, British Pound, Swiss Franc, Canadian Dollar, and Japanese Yen-giving contrarian signal that the USD may continue recent declines. We recently warned that the US Dollar was likely to fall further following bullish sentiment extremes. The Dow Jones FXCM Dollar index currently trades at multi-week lows, and there is important risk of further weakness. It nonetheless bears repeating that the US Dollar holds a record correlation to the Dow Jones Industrial Average, and the next moves in the Dow and S&P 500 could dictate moves in currency markets. We remain bearish the US Dollar (bullish EURUSD, GBPUSD and bearish USDCHF, USDJPY, USDCAD), but watch for big moves in stock markets.
EURUSD - Trading crowds turned aggressively short the Euro against the US Dollar when the pair traded near the 1.3350 mark, giving contrarian signal that the pair could continue rallying. Indeed, our SSI ratio currently stands at -1.75-showing that the number of traders short outnumber those long by 1.75 to 1. Yesterday the same ratio was at -1.48; we saw short positions increase 5.2 percent overnight and 37 percent since last week. All the while, long positions are 10.5 percent lower than they were yesterday and 16.2 percent below their levels seven days ago. Given that trading crowds remain heavily net short and continue selling, we see little reason to alter our contrarian calls for further EURUSD strength. GBPUSD - Forex trading crowds turned net-short the British Pound against the US Dollar when the pair traded near the $1.5450 mark, giving contrarian signal that the pair could continue its advance. The SSI ratio currently stands at -1.57 as approximately 61% of traders are short. Yesterday, that same ratio was at -2.41; Short positions are 27.0% lower than yesterday and 25.3% stronger since last week. Long positions are 11.7% higher than yesterday and 1.4% stronger since last week. The fact that crowds remain net-short gives us a bullish contrarian bias, but the sudden drop in short interest limits our enthusiasm in fresh GBPUSD long positions.
USDJPY - Trading crowds remain aggressively net-long the US Dollar against the Japanese Yen and have remained long since the pair traded near the 90.00 mark. Yet the pair has seemingly refused to break to fresh lows. Our subsequent bias is cautiously bearish-we'll need to see fresh conviction to the downside before taking a more aggressive stance. The ratio of long to short positions in the USDJPY stands at 9.21 as nearly 90% of traders are long. Yesterday, the ratio was at 5.54 as 85% of open positions were long. In detail, long positions are 20.2% higher than yesterday and 10.4% weaker since last week. Short positions are 27.7% lower than yesterday and 1.3% weaker since last week. The SSI is a contrarian indicator and signals further USDJPY losses.
View further currencies and charts in the PDF below.
| 
08:18
AutoForexTradingPro
