The GBPUSD has put in for its largest bullish retracement since the pair started gaining momenum on the November trend change. Does this mean the market is looking at a new bull wave? According to the SSI sentiment indicator, retail traders have just flipped to a net short positioning on the same day the British pound generated a 200 point-plus rally. And, from a technical standpoint, a steady, decending trend channel has given way and potentially sets up a new corrective wave count.
• GBPUSD – Sterling Positioning Near Flip, Bullish Reading May Be On The Horizon • EURUSD – Open Interest In EURUSD Drops, Net Short Slimming • USDJPY – Despite Carry Trade Volatility, Long Positioning Remains Above 105 Support • USDCHF – Open Interest Jumps As Traders Look For A USDJPY Alternative • USDCAD – SSI Holds At 2.27 Even As USDCAD Pulls Back From 1.0375
We have been calling for a rally in the EURUSD since the pair was trading at 1.26. Find our more in the DailyFX Forum.
EURUSD - The ratio of long to short positions in the EURUSD stands at -1.27 as nearly 56% of traders are short. Yesterday, the ratio was at -1.21 as 55% of open positions were short. In detail, long positions are 0.9% higher than yesterday and 5.5% stronger since last week. Short positions are 6.1% higher than yesterday and 25.2% weaker since last week. Open interest is 3.7% stronger than yesterday and 9.0% below its monthly average. The SSI is a contrarian indicator and signals more EURUSD gains.
GBPUSD - The ratio of long to short positions in the GBPUSD stands at 1.03 as nearly 51% of traders are long. Yesterday, the ratio was at 1.64 as 62% of open positions were long. In detail, long positions are 13.0% lower than yesterday and 14.4% weaker since last week. Short positions are 37.9% higher than yesterday and 29.1% stronger since last week. Open interest is 6.3% stronger than yesterday and 10.8% above its monthly average. With open interest growing and the SSI reading close to flipping, the rebound in GBPUSD spot is finding support from sentiment. A break higher will likely come with a run on short stops while simultaneously triggering long positions a potentially significant shift in the SSI and positioning.
Take a look at Jamie's technical outlook for GBPUSD.
USDJPY - The ratio of long to short positions in the USDJPY stands at 1.72 as nearly 63% of traders are long. Yesterday, the ratio was at 1.90 as 66% of open positions were long. In detail, long positions are 4.0% lower than yesterday and 16.1% stronger since last week. Short positions are 6.3% higher than yesterday and 23.6% weaker since last week. Open interest is 0.5% weaker than yesterday and 1.4% above its monthly average. The SSI is a contrarian indicator and signals more USDJPY losses.
USDCHF - The ratio of long to short positions in the USDCHF stands at 1.55 as nearly 61% of traders are long. Yesterday, the ratio was at 1.56 as 61% of open positions were long. In detail, long positions are 4.5% higher than yesterday and 25.6% stronger since last week. Short positions are 4.8% higher than yesterday and 19.2% weaker since last week. Open interest is 4.6% stronger than yesterday and 2.6% below its monthly average. The SSI is a contrarian indicator and signals more USDCHF losses.
USDCAD - The ratio of long to short positions in the USDCAD stands at 2.26 as nearly 69% of traders are long. Yesterday, the ratio was at 2.26 as 69% of open positions were long. In detail, long positions are 1.0% higher than yesterday and 1.7% weaker since last week. Short positions are 0.9% higher than yesterday and 10.6% weaker since last week. Open interest is 1.0% stronger than yesterday and 3.5% below its monthly average. The SSI is a contrarian indicator and signals more USDCAD losses.
How to 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.