Latest Release Dated 06/1/06 (10:00 GMT)
· EUR/USD – Trapped in a Range, Still Signaling Limited Losses
· GBP/USD – Divergence Between EUR/USD and GBP/USD Direction Signals More Gains for EUR/GBP
· USD/CHF – Has Remained Net Long Since April 4th
· USD/JPY – Ratio Flips to Net Short for the First Time Since April 21
The ratio of longs to shorts in the EUR/USD is 1.54, which is within the extreme +/- 3 range. The EUR/USD has come under pressure over the past two days as the ratio remains net long. As we have said, losses so far has been limited with the USD/CHF ratio not confirming the EUR/USD signal. The USD/CHF ratio is calling for more losses in USD/CHF which conflicts with the EUR/USD signal that is also calling for losses. The flip flop nature of the EUR/USD ratio during the week confirms the range bound behavior of the EUR/USD. Speculators have increased their positioning by 10.5 percent over the past week as long positions rise by 17.5 percent while short positions increase by 1.3 percent.
The ratio of longs to shorts in the GBP/USD is -1.22, which is within the extreme +/- 3 range. The GBP/USD ratio has remained mostly net short since April 12th but has grown far less so. Last week, we had said that the divergence between the EUR/USD and GBP/USD ratio, where the EUR/USD ratio is net long while the GBP/USD ratio is net short signaled more gains for EUR/GBP which is what we saw over the week. Now, the ratio is still diverging, indicating that EUR/GBP could rally even further. As for the GBP/USD, the bias is still for more gains and the current losses should be limited until the ratio flips. Total positioning has fallen modestly by 2.3 percent with long positions rising by 2.2 percent and short positions falling by 5.7 percent.
The ratio of longs to shorts in USD/CHF is +1.75, which is within the extreme +/- 3 range. The ratio has remained mostly net long since April 4th and is not far from last week’s levels. USD/CHF continues to consolidate and as mentioned in the EUR/USD section, the lack of confirmation for the current signal in the EUR/USD suggests that losses in the pair could still remain limited. Total positions have rebounded after dropping last week by 6.5 percent. The biggest change was in short positions, which rose 20 percent. Long positions were unchanged.
The ratio of longs to shorts in the USD/JPY is -1.14, which is within the extreme +/- 3 range. After remaining net long since April 21 the USD/JPY ratio has just flipped this morning to net short. This has coincided with a break of the ascending triangle formation in USD/JPY. If the ratio remains net short for at least 1 or 2 more periods, the SSI could be signaling a true turn in USD/JPY. Total positioning has increased modestly, rising 4.3 percent as long positions fall by 10.7 percent and short positions rise by 22.3 percent.