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US Dollar Forecast Moderates on Forex Sentiment.

Summary: EURUSD Eoe1/4" Euro Forecast Becomes Far Less Bullish GBPUSD Eoe1/4" Trading Strategies Prosper on GBP Rallies USDJPY Eoe1/4" Japanese Yen Outlook Unclear Versus US Dollar USDCHF...

EURUSD - Euro Forecast Becomes Far Less Bullish GBPUSD - Trading Strategies Prosper on GBP Rallies USDJPY - Japanese Yen Outlook Unclear Versus US Dollar USDCHF - Swiss Franc Trading Bias Remains Bullish USDCAD - Canadian Dollar Forecast to Gain vs. US DollarWhile the SSI is available once a week on DailyFX.com, you can receive SSI readings twice a day in DailyFX Plus Forex Intraday Trading Signals It was an impressive week for forex trading sentiment-based forecasts, as our SSI-based currency systems went heavily short the US Dollar and Japanese Yen ahead of the pair's sharp drops through recent trade. A more recent moderation in US Dollar and Japanese Yen losses has meant that forex trading crowd sentiment is far less one-sided, and our forecasts have accordingly become less clear. Traders aggressively bought the US currency as it continued to decline, and our contrarian trading systems presciently faded sentiment extremes on the USD's tumble. Some of those systems have now covered US Dollar short exposure, and we await sentiment clarification before taking aggressive stances on all but a select few currency pairs. Historical Charts of Speculative Forex Trading Positioning EURUSD - Our sentiment-based Euro/US Dollar forecast has turned decidedly less bullish, as forex trading crowds have moderated their previously aggressive trading stance. In the EURUSD's run up to fresh Year-to-date highs, the vast majority of traders remained heavily net short-giving us contrarian signal to buy. Now that the pair has pulled back, the ratio of long to short positions in the EURUSD stands at -1.29 as nearly 56% of traders are short. In detail, long positions are 21.8% higher than yesterday and 13.8% weaker since last week. Short positions are 7.1% lower than yesterday and 15.7% stronger since last week. The SSI is a contrarian indicator and signals further gains, but the recent shift towards long positions waters down our short-term bullish forecast. GBPUSD -Our sentiment-based forex trading strategies went aggressively long the GBPUSD on its run to fresh peaks, as clearly one-sided market sentiment gave contrarian signal to go long. The more recent pullback limits our bullish bias, as the ratio of long to short positions in the GBPUSD stands at -1.14 with only 53% of traders currently short. Yesterday, the ratio was at -2.07 as 67% of open positions were short. In detail, long positions are 35.9% higher than yesterday and 29.4% stronger since last week. Short positions are 24.8% lower than yesterday and 18.3% weaker since last week. The sharp drop in short positions and aggressive gains in longs actually signals that the rally may be coming to an end, and a continued shift would give contrarian signal to go short the pair. USDJPY - Our sentiment-based forecast on the US Dollar/Japanese Yen pair has been fairly mixed as of late, with lackluster USDJPY price action making for indecisive forex trading crowd biases. The ratio of long to short positions in the USDJPY stands at 1.15 as nearly 54% of traders are long. Yesterday, the ratio was at 1.49 as 60% of open positions were long. In detail, long positions are 4.3% lower than yesterday and 5.5% stronger since last week. Short positions are 24.1% higher than yesterday and 5.6% weaker since last week. The very recent shift towards short positions suggests that trading crowds may soon turn net-short the currency pair-a contrarian signal to buy. Yet we will wait for clarification in sentiment before taking an aggressive trading bias. USDCHF - Our sentiment-based forecast for the US Dollar/Swiss Franc currency pair has remained aggressively bearish through recent trade, but a more recent moderation has led some of our forex trading strategies to close previous short positions. The ratio of long to short positions in the USDCHF stands at 2.19 as nearly 69% of traders are long. This is a fairly substantial shift from just several days ago, when the ratio stood at over 3 as more than 75% of traders were long. In detail, long positions are 8.2% lower than yesterday and 61.0% stronger since last week. Short positions are 5.7% higher than yesterday and 27.9% weaker since last week. A ratio over 2 still gives us a contrarian bearish bias, but the recent moderation suggests that sentiment may soon flip and actually produce a 'buy' signal. USDCAD - Our sentiment-based US Dollar/Canadian Dollar exchange rate forecast remains bearish, as extremely one-sided forex sentiment points to further losses. The ratio of long to short positions in the USDCAD stands at 3.14 as nearly 76% of traders are long. In detail, long positions are 4.6% lower than yesterday and 6.7% weaker since last week. Short positions are 2.8% higher than yesterday and 4.0% stronger since last week. Though the USDCAD SSI ratio has moderated through very recent trade, the extremely net-long trading bias gives us persistent contrarian signal to stay short the currency pair. GBPJPY - Extremely one-sided forex sentiment led our forex trading strategies to go aggressively long the British Pound/Japanese Yen currency pair on its run-up to fresh multi-month peaks. A more recent moderation in trading crowd sentiment nonetheless suggests that the pair could soon turn, and our sentiment-based biased is admittedly less clear. The ratio of long to short positions in the GBPJPY stands at -1.33 as nearly 57% of traders are short. In detail, long positions are 11.8% lower than yesterday and 2.1% weaker since last week. Short positions are 7.3% lower than yesterday and 22.6% weaker since last week. The noteworthy drop in short orders moderates our previously bullish sentiment-based bias on the GBPJPY. We now await a clarification in crowd trading bias before taking a more aggressive stance on the volatile currency pair. How do we interpret the SSI? Read our brand-new Primer on the SSI. Follow up-to-the-minute updates on the SSI through DailyFX+ and our newest product: The Forex Stream Have any further questions about the SSI and forex positioning data? Ask the author David Rodriguez on our forex forum. We love getting feedback on our reports. Tell us how we're doing: E-mail the author of this report at drodriguez@dailyfx.com.

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Publication:Mena Report
Date:Aug 6, 2009
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