| | | FXCM SSI: US Dollar Likely Set Important Top versus Euro
| EURUSD - Euro Forecast to gain versus US Dollar
GBPUSD - British Pound Forecast Bearish
USDJPY - Yen Poised to Continue Rally
USDCHF - Swiss Franc Expected to Weaken
USDCAD - Canadian Dollar Likely to Fall Further
GBPJPY - British Pound Outlook Bearish vs Yen
A recent shift in forex trading crowd sentiment points to US Dollar (ticker: USDOLLAR) losses against the Euro, underlining a significant change in market positioning and pivotal move for the EURUSD.
Last week we wrote that the US Dollar could soon head for losses as traders showed clear hesitation in key USD pairs and warned of a potential trend shift. Indeed, the Dow Jones FXCM Dollar Index may soon head lower as it breaks key technical support levels.
Watch for further US Dollar losses through upcoming trade. Given the USD's record correlation to the Dow Jones Industrial Average and broader financial markets, this would imply risks of a noteworthy bounce in stocks.
EURUSD - Forex trading crowds have sold aggressively into recent Euro/US Dollar strength, giving contrarian signal that the pair may have set an important bearish extreme and is likely to continue higher. Trading crowds have been fairly consistently net-long the EURUSD since it traded near 1.4400. That sentiment has now flipped warns that we may see a short-term relief rally. Indeed, it seems ill-advised to now chase EURUSD weakness with fresh short positions.
The ratio of long to short positions in the EURUSD stands at -1.16 as 54% of traders are short. Yesterday, the ratio was at 1.01 as positioning was effectively neutral. In detail, long positions are 5.1% higher than yesterday and 14.5% weaker since last week. Short positions are 23.1% higher than yesterday and 19.4% stronger since last week. The SSI is a contrarian indicator and the crowd's flip to net-short calls for further EURUSD gains.
GBPUSD - Forex trading crowds remain heavily net-long the British Pound against the US Dollar, warning that the pair could continue lower through upcoming trade. It serves to note that positioning was far more one-sided two weeks ago, and the relative moderation waters down our previous bearish bias. Yet the overall downtrend remains intact, and crowd sentiment calls for weakness.
The ratio of long to short positions in the GBPUSD stands at 2.28 as nearly 70% of traders are long. Yesterday, the ratio was at 1.42 as 59% of open positions were long. In detail, long positions are 12.3% higher than yesterday and 16.3% stronger since last week. Short positions are 30.1% lower than yesterday and 23.1% weaker since last week. The SSI is a contrarian indicator and one-sided sentiment signals more GBPUSD losses.
USDJPY - Trading crowds remain aggressively net-long the US Dollar against the Japanese Yen, but the pair 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 a massive 9.41 as nearly 90% of traders are long. Yesterday, the ratio was at 8.34 as 89% of open positions were long. In detail, long positions are 5.4% higher than yesterday and 19.3% stronger since last week. Short positions are 6.5% lower than yesterday and 27.3% weaker since last week. The SSI is a contrarian indicator and has called for USDJPY losses since the pair traded near 90.00. Yet the shorter-term picture is less clear on recent range trading.
USDCHF - Trading crowds have significantly scaled back US Dollar long positions against the Swiss Franc, giving contrarian signal that the pair may continue higher. The ratio of long to short positions in the USDCHF stands at -1.01 as just over 50% of traders are short. Yesterday, the ratio was at 1.20 as 54% of open positions were long. In detail, long positions are 2.7% lower than yesterday and 33.1% weaker since last week. Short positions are 10.0% higher than yesterday and 4.7% weaker since last week.
The flip to net-short is marginal, but it represents a substantial shift in crowd sentiment and warns that the US Dollar may continue to rally against the falling Swiss Franc.
USDCAD - Trading crowds remain strongly net-short the US Dollar against the Canadian dollar, giving contrarian signal that the pair may continue its advance. The ratio of long to short positions in the USDCAD stands at -2.03 as nearly 67% of traders are short. Yesterday, the ratio was at -1.76 as 64% of open positions were short. In detail, long positions are 4.6% lower than yesterday and 12.2% weaker since last week. Short positions are 9.8% higher than yesterday and 35.5% weaker since last week. The SSI is a contrarian indicator and strongly net-short crowd positioning calls for further USDCAD gains.
GBPJPY - Crowds have grown modestly net-long the British Pound against the Japanese Yen, giving us a roughly bearish GBPJPY bias. The ratio of long to short positions in the GBPJPY stands at 1.67 as nearly 62% of traders are long. Yesterday, the ratio was at 1.50 as 60% of open positions were long. In detail, long positions are 2.4% higher than yesterday and 20.6% weaker since last week. Short positions are 7.9% lower than yesterday and 35.5% weaker since last week. The net-long ratio suggests the GBPJPY could continue lower, but we would need to see greater conviction before calling for more aggressive GBPJPY declines.
Have further questions on the SSI? Contact our resident SSI expert at drodriguez@fxcm.com
How do we interpret the SSI? Watch an FXCM Expo Presentation that explains the SSI.
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Best regards,
David RodrÃguez, Quantitative Strategist
drodriguez@dailyfx.com |
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AutoForexTradingPro
