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11.02.06.1

Historical Charts of Speculative Positioning

11.02.06.2

EURUSD - The ratio of longs to shorts is -1.5 as 60% of the currently open orders are short. The sentiment flipped to net short during the first trading hours of the week and has remained mostly net long since then coinciding with 164 pips gain in the currency pair. Long orders are 1.4% lower than yesterday and 6% weaker since last week. Short orders are 14.8% higher than yesterday and 8.4% stronger since last week. Open interest is 7.7% stronger than yesterday and 2% below its monthly average. Looking ahead, the SSI signals EUR/USD strength and we expect the existing up trend is likely to test the September 22nd high at 1.2830.

11.02.06.3

GBPUSD - The ratio of longs to shorts is -5.64 as 84.9% of the currently open orders are short. Two weeks ago, the sterling ratio flipped to net short and has remained mostly net short since then coinciding with 450 pips gain in the currency pair. Long orders are 5.2% higher than yesterday and 23.6% weaker since last week. Short orders are 5.8% higher than yesterday and 60.3% stronger since last week. Open interest is 5.7% stronger than yesterday and 43.0% above its monthly average. Looking ahead, the SSI signals sterling strength.

 

11.02.06.4

 

USDCHF - The ratio of longs to shorts is 2.97 as 74.8% of the currently open orders are long. Long orders are 3.9% higher than yesterday and 23.7% stronger since last week. Short orders are 6.6% higher than yesterday and 7.6% weaker since last week. Open interest is 4.6% stronger than yesterday and 12.4% above its monthly average. Looking ahead, the Swiss ratio confirms the EURUSD signal and points to USDCHF weakness.

 

11.02.06.5

 

USDJPY - The ratio of longs to shorts is 1.28 as 56.2% of the currently open orders are long. The ratio flipped to net long ahead of a 150 pips drop in the currency pair and has remained mostly net long since then. Long orders are 5.2% higher than yesterday and 59.2% stronger since last week. Short orders are 6.7% lower than yesterday and 30.8% weaker since last week. Open interest is 0.4% weaker than yesterday and 11.6% below its monthly average. Looking ahead, the SSI signals USDJPY weakness.

 

11.02.06.6

 

USDCAD - The ratio of longs to shorts is 2.20 as 68% of the currently open orders are long.. Long orders are 4.5% higher than yesterday and 14.3% weaker since last week. Short orders are 24.0% higher than yesterday and 92.3% stronger since last week. Open interest is 10% stronger than yesterday and 4.6% above its monthly average. The loonie ratio has remained mostly net long since May 2005, when the pair was trading at 1.26, coinciding with 2300 pips depreciation in the currency pair. Looking ahead, the ratio continues to signal USDCAD weakness.

 

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. If the EURUSD ratio is -3.00 short customer orders in the EURUSD exceed long orders by a ratio of 3 to 1. A negative number indicates that traders are net short while a positive number indicates that traders are net long. 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, higher the number of short orders in a bull market 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.