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US Dollar Forecast to Trade Lower on Crowd Sentiment

US Dollar Forecast to Trade Lower on Crowd Sentiment

2011-10-20 14:57:00
David Rodriguez, Head of Product
Share:
ssi_table_story_1_body_Picture_5.png, US Dollar Forecast to Trade Lower on Crowd Sentiment

Forex trading crowds remain net-long the US Dollar (ticker: USDOLLAR) against the Euro, British Pound, Swiss Franc, Canadian Dollar, and Japanese Yen—giving us contrarian signal that the currency may slide to further lows through upcoming trade.

We have continued to warn that the US Dollar hit bullish sentiment extremes and could trade lower against major counterparts. A key difference between this week and the last, however, is the fact that the USD has indeed seen a large correction and sentiment has moderated accordingly.

Recently range-bound price action in the S&P 500 has kept the US Dollar in similarly tight trading ranges. Indeed, a record US Dollar correlation to the Dow Jones Industrial Average emphasizes that moves in broader financial markets will continue to drive currencies. Thus we will continue to watch the Dow, but we maintain a modestly bearish US Dollar trading bias.

View an FXCM Expo presentation on the Speculative Sentiment Index for better understanding on how we use it in our trading.

ssi_table_story_1_body_Picture_11.png, US Dollar Forecast to Trade Lower on Crowd Sentiment

How do we interpret the SSI? Watch an FXCM Expo Presentation that explains the SSI.

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

To contact David, e-mail drodriguez@dailyfx.com

To be added to David’s e-mail distribution list for this and other reports, e-mail subject line “Distribution List” to drodriguez@dailyfx.com

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