Retail forex trading crowds are extremely net-long the US Dollar (ticker: USDOLLAR) against the Japanese Yen, and the ratio of traders long per short stands at a whopping 10.8 to 1. Indeed, retail positioning is at its most one-sided USDJPY since the pair traded near record-lows in February, and we believe there is clear evidence in favor of a significant Japanese Yen top.
Catching bottoms is always extremely risky, and we’ll need to see some sort of confirmation before we get into a long position. Indeed, we may wait for our sentiment-based “Tidal Shift” strategy to take a long position before considering an entry. In the meantime, such extremely one-sided retail trader sentiment leaves us unwilling to join the crowd of USDJPY longs.
How do we interpret and trade with the SSI? Watch an FXCM Expo Presentation that explains the SSI.
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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Meet the DailyFX team in Las Vegas at the annual FXCM Traders Expo, November 2-4, 2012 at the Rio All Suite Hotel & Casino. For additional information regarding the schedule, workshops and accommodations, visit the FXCM Trading Expo website.
