After nine solid months of negative positioning and steady yen advance, the USDJPY Speculative Sentiment Index ratio has finally flipped with a -1.11 reading. Officially, the shift in sentiment occurred at the turn of the month when the pair rallied through 100 and put the steady trend into doubt. What’s more, the details reveal that this notable change in sentiment has come with considerable shifts in positioning. In detail, longs have sank 37.6% since yesterday and plummeted 50% since last week. Absorbing some of the capital from stops and profit taking on the long side, short positions jumped 19.2% from yesterday and are 14.5% greater than last week. Altogether though, open interest is 16.8% weaker than Wednesday and 11.4% below the monthly average. As a contrarian indicator, the negative SSI ratio points to an extended USDJPY advance.
• EURUSD – Euro SSI Reading Closes In On A Flip
• GBPUSD – Pound Longs Drop 21% From Last Week
• USDJPY – Yen Sentiment Flips After USDJPY Rises Above 100
• USDCHF – SSI Points To Further Franc Declines
• USDCAD –Canadian Dollar SSI Still Holding Off On Flip
While the SSI is available once a week on DailyFX.com, you can receive SSI readings twice a day in DailyFX-Plus!
The SSI has been calling for a rally in the EURUSD since the pair was trading at 1.26. Find our more in the DailyFX Forum.
* Negative ratio indicates net short
Historical Charts of Speculative Positioning
EURUSD – Speculative retail traders have increased their short EURUSD positions modestly since last week, yet the net ratio is still very close to a remarkable flip. The Speculative Sentiment Index ratio stands at -1.19 compared to -1.16 last week and -1.47 the week before that. Looking back over the historical SSI data, it is clear that the negative reading the euro has held since the end of 2006 has grown less extreme with time; and bleeding momentum for a possible flip. Looking to the gauge’s details, long positions were only 1.8% greater than yesterday and up 6.1% on the week. Shorts fell1.8% since Wednesday, though they grew 5.9% since last week. Net positioning was 6.0% firmer than last week, though open interest is still 7.6% below the monthly average. As a contrarian indicator, the SSI points to an extended EURUSD advance, but the potential for a flip looms large.
Learn more about where the EUR/USD is headed in the Euro currency room.
GBPUSD – GBPUSD speculative positioning has held relatively consistent from week to week since the end of February; but there has been a notable drop in open interest recently that may suggest a shift in sentiment is at hand. The pair’s ratio of long to short positions is at -1.39 compared to the -1.50 level last Thursday. Net positioning dropped 11.2% since last week, adding to the 28% drop in open interest over the previous period. The breakdown of the ratio shows that long positions are 5.3% higher than yesterday, though they have dropped 21.4% since last Wednesday. Short GBPUSD trades on the other hand rose 9.2% from Wednesday and were 2.1% weaker than last week.
Read more about the GBP/USD in the British Pound currency room.
USDJPY – After nine solid months of negative positioning and steady yen advance, the USDJPY Speculative Sentiment Index ratio has finally flipped with a -1.11 reading. Officially, the shift in sentiment occurred at the turn of the month when the pair rallied through 100 and put the steady trend into doubt. What’s more, the details reveal that this notable change in sentiment has come with considerable shifts in positioning. In detail, longs have sank 37.6% since yesterday and plummeted 50% since last week. Absorbing some of the capital from stops and profit taking on the long side, short positions jumped 19.2% from yesterday and are 14.5% greater than last week. Altogether though, open interest is 16.8% weaker than Wednesday and 11.4% below the monthly average. As a contrarian indicator, the negative SSI ratio points to an extended USDJPY advance.
Stay ahead by visiting the Yen currency room.
USDCHF – Though USDCHF has recently taken its cues from the yen-based major, the two have begun to diverge with both sentiment and underlying price action. While USDJPY has just marked a flip this weak, USDCHF positioning has held net negative for nearly a month now. At the same time, though the franc-based pair has entertained a negative reading for far longer than its yen counterpart, the USDCHF upside has been far more modest than what USDJPY has seen in just the past few days. The USDCHF ratio stands at -1.52, with 60% of traders short, compared to -1.22 yesterday and –1.26 last week. In detail, long positions have dropped 14.4% from Wednesday and 44.8% since last week. Suggesting retailers are trying to pick a top, shorts grew 6.7% from yesterday and 27.6% from last week. Open interest is fell a modest 2.8% from yesterday and is only 2.1% below its monthly average.
For additional information about the USD/CHF, check out the Swiss Franc currency room.
USDCAD – The USDCAD SSI continues to hold just above parity, keeping a flip to net negative speculative retail sentiment and projection for gains just out of reach. The pair’s ratio stands at 1.64 with 62% of traders long. Compared to last week’s 1.45 reading, sentiment is more firmly set with its positive bias; but the long-term trend in net positioning has clearly eased from six months ago, and even a month ago. From the details we can see that long positions are only 1.6% greater than yesterday, but 9.4% stronger than last week. Shorts are only 0.3% weaker than yesterday and 0.8% below last week’s level. Open interest has seen similarly modest changes, with net positions only 0.9% greater than yesterday and 5.2% below its monthly average. As a contrarian indicator, the SSI signals more USDCAD losses, but a big flip may occur in the near future.
Visit the Canadian dollar currency room for additional resources.
Written by John Kicklighter, Currency Analyst for DailyFX.com
Have comments or questions on this or other articles authored by John? E-mail him at [email protected].
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. 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, the higher the number of short orders in a bull market the 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.
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