Monday, 14 Jun 2010 10:15 GMT SSI: USDCHF Ratio Flips Following 33% Jump in Longs

FXCM Speculative Sentiment Index (SSI) Statistics:

Intraday Highlight: 

USDCHF - 53% of retail traders are long (long to short ratio is 1.14). . Last week, the ratio was at -1.70 as 63% of open positions were short. Retail has been buying more USDCHF (long positions are up by 56.7% since last week). In the past, when retail was long and buying more, the USDCHF has sold off in the following days. The SSI gives us a STRONG SIGNAL TO SELL USDCHF.

SSI Details:

EURUSD – 55% of retail traders are short (long to short ratio is -1.25). . Last week, the ratio was at 1.45 as 59% of open positions were long. Retail has been selling more EURUSD (short positions are up by 38.8% since last week). In the past, when retail was short and selling more, the EURUSD has rallied in the following days. The SSI gives us a STRONG SIGNAL TO BUY EURUSD.

GBPUSD – 58% of retail traders are short (long to short ratio is -1.39). . Last week, the ratio was at 1.04 as 51% of open positions were long. Retail has been selling more GBPUSD (short positions are up by 24.8% since last week). In the past, when retail was short and selling more, the GBPUSD has rallied in the following days. The SSI gives us a STRONG SIGNAL TO BUY GBPUSD.

GBPJPY – 52% of retail traders are long (long to short ratio is 1.07). Retail has been buying more GBPJPY (long positions are up by 1.1% since last week). In the past, when retail was long and buying more, the GBPJPY has sold off in the following days. The SSI gives us a STRONG SIGNAL TO SELL GBPJPY.

USDJPY – 54% of retail traders are short (long to short ratio is -1.17). . Last week, the ratio was at 1.55 as 61% of open positions were long. Retail has been selling more USDJPY (short positions are up by 94.5% since last week). In the past, when retail was short and selling more, the USDJPY has rallied in the following days. The SSI gives us a STRONG SIGNAL TO BUY USDJPY.

USDCHF – 53% of retail traders are long (long to short ratio is 1.14). . Last week, the ratio was at -1.70 as 63% of open positions were short. Retail has been buying more USDCHF (long positions are up by 56.7% since last week). In the past, when retail was long and buying more, the USDCHF has sold off in the following days. The SSI gives us a STRONG SIGNAL TO SELL USDCHF.

USDCAD – 68% of retail traders are long (long to short ratio is 2.13). Retail has been buying more USDCAD (long positions are up by 41.4% since last week). In the past, when retail was long and buying more, the USDCAD has sold off in the following days. The SSI gives us a STRONG SIGNAL TO SELL USDCAD.

AUDUSD – 62% of retail traders are short (long to short ratio is -1.66). . Last week, the ratio was at 1.68 as 63% of open positions were long. Retail has been selling more AUDUSD (short positions are up by 87.6% since last week). In the past, when retail was short and selling more, the AUDUSD has rallied in the following days. The SSI gives us a STRONG SIGNAL TO BUY AUDUSD.

NZDUSD – 64% of retail traders are short (long to short ratio is -1.75). . Last week, the ratio was at 3.08 as 76% of open positions were long. Retail has been selling more NZDUSD (short positions are up by 133.9% since last week). In the past, when retail was short and selling more, the NZDUSD has rallied in the following days. The SSI gives us a STRONG SIGNAL TO BUY NZDUSD.

How to Interpret the SSI? The FXCM SSI is based on proprietary customer flow information and is designed to realize 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.