fxcm speculative sentiment index

Forex Sentiment: US Dollar Forecast to Pull Back Against Japanese Yen

Thursday, 19 February 2009 13:41:13 GMT  |  David Rodriguez, Quantitative Analyst

EURUSD – Euro Forecast Grows Less Bearish on Forex Positioning
USDJPY – Forex Traders Flip  Long the USD/JPY – Reversal Likely
GBPUSD – British Pound Unclear on Mixed Forex Sentiment
USDCHF – US Dollar/Swiss Franc Forecast Remains Bullish
USDCAD – Canadian Dollar Forecast Bearish Against US Dollar

While the SSI is available once a week on DailyFX.com, you can receive SSI readings twice a day in DailyFX Plus Forex Intraday Trading Signals

The SSI sought a EURUSD rally since 1.26 and was signaling a reversal around 1.60.  Find our more in the DailyFX Forex Forum 

Historical Charts of Speculative Forex Trading Positioning

EURUSD – The ratio of long to short positions in the EURUSD stands at 1.05 as nearly 51% of traders are long. Yesterday, the ratio was at 1.16 as 54% of open positions were long. In detail, long positions are 17.6% higher than yesterday and 49.6% stronger since last week. Short positions are 28.8% higher than yesterday and 49.7% stronger since last week. Open interest is 22.8% stronger than yesterday and 43.0% above its monthly average. The SSI is a contrarian indicator and signals more EURUSD losses. Our sentiment-based forex trading signals have nonethelss closed their short positions on the day's rebound.  

USDJPY – Our contrarian forex trading strategies have finally gone long the USD/JPY, as forex sentiment has increasingly pointed to further rallies. Yet we likewise note that our contrarian SSI ratio has more recently flipped to bearish territory;  the ratio of long to short positions in the USDJPY stands at 1.22 as nearly 55% of traders are long. Yesterday, the ratio was at 1.03 as 51% of open positions were long. In detail, long positions are 16.0% higher than yesterday and 9.4% weaker since last week. Short positions are 2.5% lower than yesterday and 6.3% stronger since last week. Open interest is 6.9% stronger than yesterday and 19.7% below its monthly average. The SSI is a contrarian indicator and signals that the USD/JPY may finally turn down after a series of impressive rallies.

GBPUSD – Increasingly uncertain forex market conditions have left our sentiment-based forex trading strategies flat the GBP/USD. Indeed, the ratio of long to short positions is near neutral for the GBPUSD, as it stands at 1.03; nearly 51% of traders are long. Yesterday, the ratio was at 1.13 as 53% of open positions were long. In detail, long positions are 19.0% higher than yesterday and 27.7% stronger since last week. Short positions are 30.7% higher than yesterday and 82.2% stronger since last week. Open interest is 24.5% stronger than yesterday and 26.5% above its monthly average. The SSI is a contrarian indicator and gives weak signal for GBPUSD losses.

USDCHF – The ratio of long to short positions in the USDCHF stands at -1.10 as nearly 52% of traders are short. Yesterday, the ratio was at 1.02 as 50% of open positions were long. In detail, long positions are 26.0% higher than yesterday and 37.8% stronger since last week. Short positions are 40.8% higher than yesterday and 42.4% stronger since last week. Open interest is 33.3% stronger than yesterday and 1.8% below its monthly average. The SSI is a contrarian indicator and signals more USDCHF gains. All the same, our sentiment-based forex trading signals are currently flat the USD/CHF.

USDCAD – The ratio of long to short positions in the USDCAD stands at -1.01 as nearly 50% of traders are short. Yesterday, the ratio was at -1.08 as 52% of open positions were short. In detail, long positions are 29.2% higher than yesterday and 36.3% stronger since last week. Short positions are 21.2% higher than yesterday and 34.3% stronger since last week. Open interest is 25.1% stronger than yesterday and 11.3% below its monthly average. The SSI is a contrarian indicator and signals more USDCAD gains. Tell us and other traders what you think in our forex forum.



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.


Have any further questions about the SSI and forex positioning data? Ask the author David Rodríguez on our forex forum.

We love getting feedback on our reports. Tell us how we’re doing: E-mail the author of this report at drodriguez@dailyfx.com.


For information on an FXCM Managed Account that takes advantage of the SSI, please review our Sentiment Program at:  http://www.fxcmmanagedaccounts.com/ or call +1 646-432-2968.

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