US Dollar Forecast to Lose Further on Sentiment Extremes

FRIDAY, 18 SEPTEMBER 2009

EURUSD – Euro Forecast Remains Bullish on Sentiment Extremes
GBPUSD – British Pound Forecast to Lose Further
USDJPY – Japanese Yen Predicted to Rally vs US Dollar
USDCHF – Swiss Franc Trading Bias Strongly Bullish on Sentiment
USDCAD – Canadian Dollar Forecast to Gain Further

While 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

Forex trading crowds remain very aggressively long US Dollars against most major counterparts, giving us contrarian signal to sell into US Dollar weakness. Indeed, an incredible 84% of traders are long the US currency versus the Swiss Franc, while a similarly substantial 74% have bought the Greenback against the Japanese Yen. Market sentiment very clearly remains at extremes, and we see few signs that the US Dollar will reverse through upcoming trade. Indeed, we will wait for signs of trading crowd capitulation before calling for a US dollar reversal.

Historical Charts of Speculative Forex Trading Positioning

EURUSD - The ratio of long to short positions in the EURUSD stands at -2.30 as nearly 70% of traders are short. Yesterday, the ratio was at -2.65 as 73% of open positions were short. In detail, long positions are 6.9% higher than yesterday and 13.7% stronger since last week. Short positions are 7.2% lower than yesterday and 4.0% stronger since last week. Open interest is 3.3% weaker than yesterday and 9.8% above its monthly average. The SSI is a contrarian indicator and signals more EURUSD gains.

GBPUSD - The ratio of long to short positions in the GBPUSD stands at 1.52 as nearly 60% of traders are long. Yesterday, the ratio was at 1.34 as 57% of open positions were long. In detail, long positions are 13.3% higher than yesterday and 47.3% stronger since last week. Short positions are 0.2% lower than yesterday and 38.5% weaker since last week. Open interest is 7.5% stronger than yesterday and 5.2% above its monthly average. The SSI is a contrarian indicator and signals more GBPUSD losses.

USDJPY - The ratio of long to short positions in the USDJPY stands at 2.83 as nearly 74% of traders are long. Yesterday, the ratio was at 3.08 as 75% of open positions were long. In detail, long positions are 4.4% lower than yesterday and 16.8% weaker since last week. Short positions are 3.9% higher than yesterday and 29.9% stronger since last week. Open interest is 2.4% weaker than yesterday and 10.8% above its monthly average. The SSI is a contrarian indicator and signals more USDJPY losses.

USDCHF - The ratio of long to short positions in the USDCHF stands at 5.39 as nearly 84% of traders are long. Yesterday, the ratio was at 4.93 as 83% of open positions were long. In detail, long positions are 6.5% lower than yesterday and 16.7% stronger since last week. Short positions are 14.4% lower than yesterday and 16.2% stronger since last week. Open interest is 7.8% weaker than yesterday and 27.9% above its monthly average. The SSI is a contrarian indicator and signals more USDCHF losses.

USDCAD - The ratio of long to short positions in the USDCAD stands at 2.92 as nearly 74% of traders are long. Yesterday, the ratio was at 3.53 as 78% of open positions were long. In detail, long positions are 19.8% lower than yesterday and 5.1% stronger since last week. Short positions are 3.1% lower than yesterday and 4.0% weaker since last week. Open interest is 16.1% weaker than yesterday and 1.9% above its monthly average. The SSI is a contrarian indicator and signals more USDCAD losses.

GBPJPY - The ratio of long to short positions in the GBPJPY stands at 2.90 as nearly 74% of traders are long. Yesterday, the ratio was at 2.88 as 74% of open positions were long. In detail, long positions are 3.2% higher than yesterday and 19.4% stronger since last week. Short positions are 2.4% higher than yesterday and 15.0% weaker since last week. Open interest is 3.0% stronger than yesterday and 5.7% above its monthly average. The SSI is a contrarian indicator and signals more GBPJPY losses.