USDJPY – US Dollar May Lose Further Against the Japanese Yen
USDCHF – Forex Sentiment Accurately Forecasts Massive Swiss Franc Rally
GBPUSD – British Pound Outlook Bearish Against Downtrodden US Dollar
USDCAD – Canadian Dollar Forecast Unclear Against US Dollar
Forex Positioning in the Euro/US Dollar
EURUSD – Forecasts for the Euro/US Dollar currency pair have now shifted to the downside, as a flip in retail forex positioning signals that the recent Euro/US Dollar uptrend may reverse. Last week we cited extremely net-short “crowd” positioning as a clear sign that the Euro would rally, but the forex crowd has now capitulated and the majority of traders are now long the EUR/USD. Indeed, the SSI ratio currently stands at 1.18 as nearly 54 percent of traders are long the pair. Yesterday only 40 percent of traders were long, and these reversals most often occur at turns in price.
Forex Positioning in the US Dollar/Japanese Yen
USDJPY – The forex trading crowd continues to buy into US Dollar/Japanese Yen declines, and such stubbornness suggests that the pair may yet fall further. That said, positioning has become far less extreme through recent trading. The ratio of long to short positions in the USDJPY stands at 1.31 as nearly 57% of traders are long. This stands in contrast with a ratio of 2.11 at this point last week, and the slow capitulation from the forex trading crowd tells us that we are zeroing in on a bottom. Through the very short term we may expect the US Dollar to continue falling against the Japanese Yen, but a stronger shift in sentiment would signal that a turn is likely.
Forex Positioning in the British Pound/US Dollar
GBPUSD –Forex positioning in the British Pound/US Dollar pair has been inconsistent through recent trading, but a recent increase in GBP/USD-long positions supports the case for near-term British Pound weakness against the US Dollar. Indeed, the ratio of long to short positions in the GBP/USD currently stands at 1.48, as nearly 60 percent of traders are currently long. Given that our Speculative Sentiment Index is most often contrarian in nature, the forex crowd’s long bias gives us reason to look for a downturn in the GBP/USD through the foreseeable future.
Forex Positioning in the US Dollar/Swiss Franc
USDCHF – Recent US Dollar/Swiss Franc price action is a testament to the effectiveness of Speculative Sentiment Index-based currency forecasts. Forex trading crowds had remained heavily net-short the USD/CHF since July, and the pair went on to mount an impressive multi-month rally. Most recently, that same crowd capitulated and actually went net-long the USD/CHF near the 1.2000 mark. The US Dollar subsequently went on to post its biggest monthly loss against the Swiss Franc in history—incredible by any standards. Looking to very short-term trading, the crowd is currently net-short the pair, with short positions outnumbering longs by 1.08 to 1. Such a flip gives us reason to look for a reversal, but a sharp drop in open interest gives us little conviction in our forecast.
Forex Positioning in the US Dollar/Canadian Dollar
USDCAD – The ratio of long to short positions in the USDCAD stands at 1.07 as nearly 52% of traders are long. Yesterday, the ratio was at -1.05 as 51% of open positions were short. In detail, long positions are 1.7% higher than yesterday and 50.6% weaker since last week. Short positions are 8.9% lower than yesterday and 11.1% stronger since last week. Open interest is 3.7% weaker than yesterday and 56.7% below its monthly average.
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