Forex Sentiment Shift Points to EURUSD, GBPUSD Losses

The FXCM Speculative Sentiment Index is an excellent tool to gauge trader positioning and sentiment in the FX market. Unlike major equities or futures markets, there is no single centralized exchange for forex trading. Such decentralized activity makes finding uniform volume or open interest data impossible. DailyFX fills the gap by offering access to FXCM’s proprietary volume and positioning information—giving an unparalleled view of forex market sentiment.

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Euro Forecast Modestly Bearish on Sentiment Swing

EURUSD – Especially choppy Euro/US Dollar price action has made for similarly indecisive shifts in crowd sentiment. The ratio of long to short positions in the EURUSD stands at 1.05 as nearly 51% of traders are long. Yesterday, the ratio was at 1.14 as 53% of open positions were long. In detail, long positions are 5.4% lower than yesterday and 8.7% stronger since last week. Short positions are 2.9% higher than yesterday and 20.1% weaker since last week. Open interest is 1.5% weaker than yesterday and 0.6% above its monthly average. On balance the sharp drop in short interest and gain in long positions over the past week leaves us modestly bullish. Yet a near-neutral SSI ratio of 1.05 does not inspire confidence in said bearish forecast.

British Pound Bias Calls for Weakness

GBPUSD –The ratio of long to short positions in the GBPUSD stands at 1.22 as nearly 55% of traders are long. Yesterday, the ratio was at 1.03 as 51% of open positions were long. In detail, long positions are 7.4% higher than yesterday and 22.0% stronger since last week. Short positions are 8.9% lower than yesterday and 12.3% stronger since last week. Open interest is 0.6% weaker than yesterday and 11.2% above its monthly average. The gain in long positions overnight and over the past week gives us contrarian signal that the GBPUSD may continue lower through upcoming trade.

Japanese Yen Forecast to Gain Further

USDJPY – The ratio of long to short positions in the USDJPY stands at 5.54 as nearly 85% of traders are long. Yesterday, the ratio was at 5.52 as 85% of open positions were long. In detail, long positions are 4.7% higher than yesterday and 9.2% stronger since last week. Short positions are 4.2% higher than yesterday and 18.1% stronger since last week. Open interest is 4.6% stronger than yesterday and 13.0% above its monthly average. The SSI is a contrarian indicator and signals more USDJPY losses. That said, a view at forex futures and options sentiment warns that we are at a potential Japanese Yen bullish sentiment extreme. The risk of a major USDJPY reversal is high.

Swiss Franc Likely to Strengthen against Dollar

Canadian Dollar May Appreciate Against USD

USDCAD – The ratio of long to short positions in the USDCAD stands at 1.78 as nearly 64% of traders are long. Yesterday, the ratio was at 1.86 as 65% of open positions were long. In detail, long positions are 0.5% higher than yesterday and 18.6% stronger since last week. Short positions are 5.0% higher than yesterday and 26.2% weaker since last week. Open interest is 2.1% stronger than yesterday and 1.7% below its monthly average. The SSI is a contrarian indicator and signals more USDCAD losses.

British Pound Forecast to decline Against Japanese Yen

GBPJPY –The ratio of long to short positions in the GBPJPY stands at 2.94 as nearly 75% of traders are long. Yesterday, the ratio was at 1.90 as 66% of open positions were long. In detail, long positions are 30.8% higher than yesterday and 10.4% stronger since last week. Short positions are 15.5% lower than yesterday and 26.5% weaker since last week. Open interest is 14.8% stronger than yesterday and 19.0% above its monthly average. The SSI is a contrarian indicator and signals more GBPJPY losses.

Weekly Overview

US Dollar Forecast Turns Bearish vs Euro, Japanese Yen

Choppy US Dollar price action has made for similarly indecisive moves in forex crowd sentiment, but the most recent move towards USD shorts against the British Pound and Euro leaves us modestly bullish the US currency through short-term trade. Yet traders remain very heavily net-long USD versus the Japanese Yen, Swiss Franc, and Canadian Dollar—warning of further losses against said currency. The effectively mixed view on the Greenback leaves us with little conviction, and we may need to wait until further clarifications in price action before taking a stronger stance in our USD forecasts.