EURUSD - The ratio of long to short positions in the EURUSD stands at -1.19 as nearly 54% of traders are short. Yesterday, the ratio was at -1.50 as 60% of open positions were short. In detail, long positions are 14% higher than yesterday and 40% stronger since last week. Short positions are 11% lower than yesterday and 4% weaker since last week. Open interest is 1.1% weaker than yesterday and 9.7% 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 -1.13 as nearly 53% of traders are short. Yesterday, the ratio was at -1.72 as 63% of open positions were short. In detail, long positions are 25.2% higher than yesterday and 4.5% stronger since last week. Short positions are 18.0% lower than yesterday and 3.8% stronger since last week. Open interest is 2.1% weaker than yesterday and 5.3% above its monthly average. The SSI is a contrarian indicator and signals more GBPUSD gains.

Once again the meat of the report tells the tale. When a ratio is -1.13 53% short well 47% are long . That doesnt help, what helps is how people perceive the leanings. Here by the writers, (calling for 2.0xxx) Euro new high thrust etc). That may be correct but the max pain is for anyone seeing that wave count, fib bounce, cycles, sun spots whatever is to go completely opposite and mess with the masses. I had sells on Euro and Cable yesterday that went NOWHERE and I elected to sleep in this morning bec. "it's not going to move b4 the announcement". My miss, I had sell triggers @ 9920 and 3500 respectively. Guess I wait for another time.

As for sentiment read in bold Cable shorts were nervous 18% lower while longs were enboldened 25% higher than yesterday. Euro same song same dance same result.

Euchre

As Jamie pointed out it is a trending indicator, but I was wondering if it would be reasonable to trade the action in the bold print in the updates to the report. I haven't been able to draw any real correlation, but I'm still digging.
Jamie - is intraday, say 4 to 8hours too small a timeframe to use the "play by play"? Thanks very much.

By the way, Jamie, I really enjoy your trading section in dailyfx+ as well as your technical strategies postings. It's inspired me to dig in to Frost and Prechter's book. Thanks again.

-thomas k.

SSI comes out twice a day and the COT is released every Friday afternoon. As per how to use the SSI - I use it as a way to gauge the psychological state of the market. If you look at the chart on the first page in this forum of SSI, you'll see that extremes in SSI lead to tops and bottoms. I do not look at the change from one day to the next but rather, the trend over the last few months.

A 4 to 8 hour time frame is a good time frame to use when swing trading based on a sentiment indicaotr such as SSI. Look at the trend of the SSI for the last few months. For example, if the SSI is near its upper range, then the odds are increasing that a top is close.

I am glad to hear that you enjoy the analysis/strategy.

The key to effective use of the SSI is your holding period. If you trade the daily chart in fx then SSI can be very helpful to your position vis a vie the big boys (Commercials). If you scalp trading hourly, 4 hr 6 hr 8 hr types well then the SSI will only "help" at the extreme edges of the market.

I wouldn't ever base a trade on SSI alone, but it can certainly help with confirmation of whatever system you use.

It appears a struck a nerve with the guts of the SSI. Let's see how the guts plays out as the week(s) progress. From today-

FXCM SSI: EURUSD Positioning Nears Parity

Tuesday, 12 June 2007 10:00:47 GMT
Written by David Rodriguez, Currency Analyst


EURUSD - The ratio of long to short positions in the EURUSD stands at 1.03 as nearly 51% of traders are long. Yesterday, the ratio was at -1.02 as 51% of open positions were short. In detail, long positions are 4.1% higher than yesterday and 44.3% stronger since last week. Short positions are 1.0% lower than yesterday and 28.7% weaker since last week. Open interest is 1.5% stronger than yesterday and 4.0% above its monthly average. The SSI is a contrarian indicator and signals more EURUSD losses.

My interrpretation is Longs are buying here "buy the dip" Shorts are nervous. My system says my "hourlies" are mildly bullishess but 6hr in nice strong downtrend - Meeting up with monster long term daily EMA, looking for more basing action. Note- my system says very clearly that the 3318 low is not done it will revisit . 3369 3395 3436 3504 key R points.

GBPUSD - The ratio of long to short positions in the GBPUSD stands at 1.19 as nearly 54% of traders are long. Yesterday, the ratio was at 1.25 as 56% of open positions were long. In detail, long positions are 1.2% higher than yesterday and 41.3% stronger since last week. Short positions are 6.1% higher than yesterday and 32.1% weaker since last week. Open interest is 3.4% stronger than yesterday and 1.7% above its monthly average. The SSI is a contrarian indicator and signals more GBPUSD losses.


Similar to Euro here though the "hourlies" much more bullish against strong 6Hr ADX down trend with monster EMA daily support. FWIW- Cable 9794 9782 should halt it in its track. Like Euro Cable isn't done but a correction higher appears in store. 9620 will be retested watch 9717 daily close 9780/9792 9894 key R values. If you aren't long already from 9690 area then I'd sit it out unless you want 2 try for those next 40 pips to the 9780/90 area watch what happens when it reaches that.

-Euchre

Disclaimer Trading Currencies involves risk. Any opinion, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice.

Think of sentiment in terms of the 'big picture'. Gauging sentiment for the coming week is much more useful than gauging sentiment for the next few hours or even days. I like to look even bigger picture. Here is analysis from my recent EURUSD article, which is here http://www.dailyfx.com/story/chartin...570303106.html

I have also attached the chart with COT positioning here.

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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 Commodity Futures Trading Commission publishes a weekly Commitment of Traders report that breaks down commercial and noncommercial positioning in the futures market. Although the report is very valuable, it is released with a 3-day delay


Why the SSI is better?

First, performance results tell you the true story. The SSI has outperformed the COT over the last four years. For performance results on the SSI please review our Sentiment Fund: http://www.FXCMManagedFunds.com

Unlike IMM data that is susceptible to distortion from a handful of large funds included in its sample, FXCM's data is derived from a diverse customer base representing a much wider spectrum of traders ranging from small retail customers to larger high net worth individuals to small institutional and hedge fund players. The vast majority of FXCM customers, over 95%, choose to trade for themselves rather than opt for managed accounts, and as a consequence the data sample encompasses an extremely diverse set of individual trading styles, risk preferences, time horizons and liquidity constraints.


What do you think? SSI or COT?

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The 10 day average of the AUDUSD 1 month risk reversal rate (25 delta)remains pointed up, which is bullish. However, there is divergence with the rate and price, which bearish. The near term sentiment picture is confusing, so there are likely better opportunities elsewhere.

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Is everyone noticing how the dow and the eurjpy are trading in tandem. They have been doing this on a larger scale since the early part of this decade but lately, they have been trading together on a very short term basis. The charts here are a 15 min eurjpy and a 5 min dow (longer for eurjpy because the market is open around the clock). The markets are trending together. If you look all the way to the left of each chart, you can follow the sequence - up, down, up, down, up. What does this tell us? It tells us that these markets are going up and down as liquidity expands and contracts. Liquidity can not expand forever, and one big margin call will occur...the question of course is when.

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EURUSD - The ratio of long to short positions in the EURUSD stands at 1.08 as nearly 52% of traders are long. Yesterday, the ratio was at 1.07 as 52% of open positions were long. In detail, long positions are 2.5% higher than yesterday and 14.7% stronger since last week. Short positions are 1.6% higher than yesterday and 1.2% stronger since last week. Open interest is 2.1% stronger than yesterday and 8.7% above its monthly average. In the last three years the EURUSD SSI has been working the best as a contrarian indicator and in the week ahead the ratio signal more EURUSD losses.

GBPUSD - The ratio of long to short positions in the GBPUSD stands at 1.38 as nearly 58% of traders are long. Yesterday, the ratio was at 1.12 as 53% of open positions were long. In detail, long positions are 10.7% higher than yesterday and 21.1% stronger since last week. Short positions are 9.8% lower than yesterday and 2.0% weaker since last week. Open interest is 1.0% stronger than yesterday and 4.9% above its monthly average. The SSI is a contrarian indicator and signals more GBPUSD losses.

USDCHF - The ratio of long to short positions in the USDCHF stands at 1.41 as nearly 58% of traders are long. Yesterday, the ratio was at 1.41 as 58% of open positions were long. In detail, long positions are 2.1% higher than yesterday and 18.3% weaker since last week. Short positions are 1.9% higher than yesterday and 43.7% stronger since last week. Open interest is 2.1% stronger than yesterday and 0.4% below its monthly average. The SSI is a contrarian indicator and signals more USDCHF losses.

USDJPY - The ratio of long to short positions in the USDJPY stands at -2.00 as nearly 67% of traders are short. Yesterday, the ratio was at -2.21 as 69% of open positions were short. In detail, long positions are 13.5% higher than yesterday and 22.9% weaker since last week. Short positions are 2.5% higher than yesterday and 26.8% stronger since last week. Open interest is 5.9% stronger than yesterday and 1.9% above its monthly average. The SSI is a contrarian indicator and signals more USDJPY gains.

USDCAD - The ratio of long to short positions in the USDCAD stands at 3.88 as nearly 79% of traders are long. Yesterday, the ratio was at 3.95 as 80% of open positions were long. In detail, long positions are 2.2% higher than yesterday and 2.8% stronger since last week. Short positions are 4.1% higher than yesterday and 12.1% weaker since last week. Open interest is 2.6% stronger than yesterday and 3.0% above its monthly average. The SSI is a contrarian indicator and signals more USDCAD losses.


For information on an FXCM Managed Fund that takes advantage of the SSI, please review our Sentiment Fund at: http://www.FXCMManagedFunds.com or call +1 646-432-2968

Jamie- Haven't noticed E/J cross, however $/Jpy seems to be positively correlated to the Dow as well. Yen weakness is going to create noise in the Eur/$ and Cable/$ pairs in the short term. Looks like a correction that has been brewing all week is underway in the Euro and Cable. E/J strength and Cable/Yen strength is certainly helping prop E/$ and Cable/$.
Watching the price action tells us as its a slog higher today after CPI.

Jamie- what do you make about that L/T trendline daily Cable- Have L/T EMA that it has bounced off of many times. My RSI trend from that Oct low has been breached and its attempting an underside comeback.

FWIW- My fractal system is saying that Next Friday and the entire following week will create serious action in Cable. 9673 / 9659 key daily spt closes
9796 / 9849 key daily R closes.

- Euchre

Disclaimer Trading Currencies involves risk. Any opinion, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice.

Notice that EURUSD, GBPUSD and USDJPY are all moving in the same direction today...they are all up. Therefore the yen crosses are up significantly. Today's story is the yen and the recent breakout might keep the story yen based next week. EURJPY is coming up on potential channel resistance right now, just below 165.00.

I also see a big move in Cable next week. It looks like a c wave will spike towards 1.9814/33 before a bigger decline occurs. I'll definitely be focusing on Cable in the technicals next week. Here is today's tech piece http://www.dailyfx.com/story/dailyfx...909900257.html

EURJPY chart below
Have a good weekend

Jamie

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The COT report was released Friday and Yen positioning was little changed but short positions are in the extreme range that has historically created tops in the USDJPY. Additional JPY losses (USDJPY gains) are possible but the psychological backdrop (extreme pessimism towards Yen) favors a turn and sizeable decline in the USDJPY, especially since the percentile indicator has turned up. Watch the 125.00 figure closely. The entire report is at dailyfx under Charting Center - Futures Positioning - COT Report

The 10 day average of the 1 month risk reversal rate is turning up from the same level that it turned higher from in October 2006. If the EURUSD downtrend is to continue, then the decline needs to accelerate soon (price must remain below 1.3552).

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Pretty interesting observation, but I'd also like to draw your attention to the 1-year risk reversal rates. They've turned negative for the first time since June '05. The pair subsequently dropped 300 points in several weeks after this happened in '05, and after a correction, eventually moved below 1.1800 before the 25-delta 1-year RR's turned higher.

Likewise significant, there's been a pretty significant divergence in price and risk reversal rates. I admittedly don't know exactly what to make of this, but I am quite sure that it's not bullish for the EURUSD. Unfortunately the Bloomberg doesn't give you access to more than 4 years of risk reversals, so I can see no historical precedent.

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