USDCAD – Our Speculative Sentiment Index briefly showed that traders turned short the US Dollar (ticker: USDOLLAR) against the Canadian Dollar for the first time since January as the USDCAD tested key range highs. Yet the pair has just as swiftly reversed, and trading crowds are once again net-long the USDCAD.
Where does that leave us? The SSI works well when pairs enter major trends and continue hitting fresh highs or falling to fresh lows. The fact that the USDCAD has been unable to make a sustained break above C$1.0050 or below C$0.9900 has made SSI-based forecasts far less effective. Indeed, we see little choice but to stick to the sidelines as the SSI is not effective in range-bound markets.
What could change that? We’ll keep a close eye on whether the Dow Jones FXCM Dollar Index breaks critical lows at the 9893 mark.
How do we interpret the SSI? Watch an FXCM Expo Presentation that explains the SSI.
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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