Latest Release Dated 07/27/06 (10:00 GMT)
EUR/USD Rally Expected to Continue for Another 100 pips
GBP/USD Speculative Position Suggests GBP/USD Could Reach 1.88
USD/CHF Ratio Has Remained Mostly Net Long for the Past Five Weeks
USD/JPY SSI Continues to Call for Strength in USD/JPY
The ratio of longs to shorts in the EUR/USD is -1.37, which is within the extreme +/- 3 range. Once again, the ratio has flipped from net long to net short, but this time, the USD/CHF ratio is confirming the EUR/USD signal. The actual flip itself occurred yesterday afternoon following the release of the Federal Reserves Beige Book report. Total positions have not changed by much, falling a mere 1.5 percent which suggests that euro bulls may have simply flipped positions. The numbers indicate that over the past week long positions fell by 22.3 percent while short positions increased by the same amount. Looking ahead, the shift in the EUR/USD ratio and the increased net long positioning in USD/CHF suggest that we could see at least another 100 point gain in the EUR/USD.
The ratio of longs to shorts in the GBP/USD is -1.47, which is within the extreme +/- 3 range. Despite some inter-week flips, the GBP/USD ratio remains basically unchanged. In line with the SSI signal, the currency pair is now approximately 200 points higher. Total positioning is only 1.8 percent lower than the previous week with both bulls and bears reducing exposure. Short positions are down by 1.4 percent while long positions are down by 2.4 percent. Looking ahead, with the GBP/USD ratio still net short, the SSI is signaling further gains in the currency pair to as far as 1.88.
The ratio of longs to shorts in USD/CHF is 1.72, which is within the extreme +/- 3 range. The ratio has now remained mostly net long for the fifth consecutive week and has correctly signaled that any losses in the EUR/USD would have been limited. The carry advantage of being long dollars and short Swiss francs is sure to have played a major role in how traders are choosing to be positioned. With the slope of the ratio heading back north, the strength of the signal for further dollar weakness is growing. Total positions in USD/CHF have seen the biggest change in positioning over the past week with a 10.2 percent drop. Short positions were pared back by 26.6 percent, while long positions are up by 3.1 percent.
The ratio of longs to shorts in USD/JPY is -1.52, which is within the extreme +/- 3 range. Having started last Thursday off at 116.78 with a ratio of -1.86, the currency pair hit a high of 117.39 on Tuesday when the ratio reached -2.42. The slope of the ratio is now beginning to level out as USD/JPY gives back some of its gains. Total positioning has fallen by 7.5 percent with short positions down by 14.2 percent and long positions up by 5.0 percent. Looking ahead, as long as the USD/JPY ratio remains net short, we are looking for more gains in the currency pair.
