The euro, Australian dollar, and Canadian dollar all attracted great forex-market interest this past week. As of April 22, the Australian dollar was up to a new, all-time high. The euro, despite Portugal's debt issues, had broken back above 1.45, and the U.S. dollar hit a three-and-a-half-year low against the loonie.
The FXCM’s Speculative Sentiment Index (SSI) was also following the pairs, and constantly signaling their next movements—much of the time different from what the fundamental news suggested. Eventually, the SSI’s forecasts turned out to be correct.
Below is the SSI’s diary of the euro, Australian dollar, and Canadian dollar for the week of April 18, and the result on the currency pairs’ price action.
The SSI Diary on Selected Dollar Pairs | April 22, 2011
For five consecutive days, the SSI has been signaling more euro-dollar gains. It has been negative every day with an average of 65% of EUR/USD traders at FXCM shorting the pair. The SSI suggests the majority of the trading crowd is usually wrong, and bases its signals on moving against the crowd.
- Result: EUR/USD continually gained. The successful trader would have been the one who had followed the SSI signal and bought the euro.*
85% of FXCM AUD/USD traders thought the Aussie was going to fall, and maintained their short positions throughout the week. As a contrarian indicator, the SSI continually suggested going against the crowd and being long the pair.
- Result: The AUD/USD hit a new, all-time high, and the successful trader would have been the one who had followed the SSI signal and bought the Australian dollar.*
The pair has been falling since mid-March. On average, 85% of FXCM’s traders were speculating on a rise in the USD/CAD, and were longing the pair. Meanwhile, the SSI continually signaled USD/CAD losses.
- Result: USD/CAD kept falling, hitting its newest low in three-and-a-half years. If the 85% of those FXCM traders had followed the SSI's consistent signal, and had sold their US dollars against the loonie, they would now be on the right side of the trade.*
EUR/USD, AUD/USD, USD/CAD Price and SSI, April 2011
*Past Performance is not indicative of future results.
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