Swiss Franc Outlook Improves
Retail forex speculators remain short the US Dollar (ticker: USDOLLAR) against the Swiss Franc, but a more recent swing in positioning warns that the pace of USDCHF rallies may slow. There are 1.6 retail traders short for every long, and we would normally take this as clear contrarian signal that the USDCHF could continue to gain. Yet short interest has fallen 10 percent overnight while long positions are up 3 percent.
Our overall bias remains modestly bullish USDCHF, but the most recent swing in sentiment gives us pause on initiating fresh long positions. In fact our sentiment-based “Tidal Shift” strategy has recently taken a long position on the short-term swing in retail positioning.
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--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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