Speculative Positioning Calls for More Gains in Euro, but Should be Limited to 1.28

Historical Charts of Speculative Positioning




The ratio of longs to shorts in the EUR/USD is 1.15, which is within the extreme +/- 3 range.  The ratio flipped from net short back to net long last Thursday afternoon and has remained there for the entire week.  This has coincided with a drop down from 1.2690 to a low of 1.2460 before the present recovery.  For those who only have access to the week to week data, the ratio has flipped but the currencys price has remained essentially unchanged since last week. Going forward, the EUR/USD SSI is signaling more gains for the currency pair, but with the USD/CHF ratio not confirming the EUR/USD signal, further gains could be limited.  Total positions in the EUR/USD have fallen by 7.6 percent to the lowest level since February 2005.  We saw a sharp decline in long positions before and after Bernankes commentary yesterday afternoon, which is indicative of profit taking.  On a week to week basis, long positions are up modestly by 1.7 percent while short positions are down by 16.4 percent. 




The ratio of longs to shorts in the GBP/USD is -1.46, which is within the extreme +/- 3 range.  The ratio has flipped from net long to net short over the past week, but the ratio has been flipping in general.  The GBP/USD currency pair has also been range trading for the past week and has only broken out today.  The ratio now signals further gains in the GBP/USD with total positioning at average levels.  Furthermore, with the EUR/USD ratio net long and the GBP/USD ratio net short, the SSI is also calling for more weakness in EUR/GBP.  Short positions have fallen by 17.8 percent over the past week while long positions are up 22.9 percent.  This brings total positioning higher by 2.3 percent.




The ratio of longs to shorts in USD/CHF is 1.23, which is within the extreme +/- 3 range.  The ratio has now remained net long for a full month.  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.  As the slope of the ratio points to the downside, USD/CHF is pointing to the upside.  The fact that the ratio is still net long however does suggest that further gains in the EUR/USD could be capped around the 1.2780-1.28 level.  Total positioning is up slightly by 3.5 percent as long positions fall by 12.3 percent and short positions rise by 32.6 percent. 




The ratio of longs to shorts in USD/JPY is -1.86, which is within the extreme +/- 3 range.  Last week, we had said that the strong net short ratio is USD/JPY signaled further gains for the currency pair.  This is exactly what we saw as the pair broke out from 115 to a high of 117.87.  The ratio continues to remain net short at the moment and as such, the call for more gains remains.  Total positioning has fallen somewhat by 5.6 percent as both bulls and bears cut exposure by 12 percent and 1.7 percent respectively.