· EUR/USD – The ratio grows more net long and further dollar gains are expected. · GBP/USD – Ratio is unchanged and the bias is for sterling strength · USD/CHF – Ratio flips to net short confirming the EUR/USD signal · USD/JPY – Ratio favors carry trades
As of September 14, 2006 (5:00 EST, 10:00 GMT)
The ratio of longs to shorts in the EUR/USD is 2.15, which is within the extreme +/- 3 range. The ratio has remained net long for the last two weeks as the currency pair change hands within a relatively narrow trading range. Total positioning is 38 percent stronger with long positions up by 89 percent but short positions down by 13 percent. An unusually change in long positions is a danger signal because many of the traders who entered the markets are leaving their stop losses just below the current price level. Looking ahead, as the ratio grows more net long the potential for further dollar strength is growing.
The ratio of longs to shorts in the GBP/USD is -1.40, which is within the extreme +/- 3 range. Over the last week speculative positions have remained unchanged, short positions are down by 34 percent while long positions are up by 81 percent bringing total positioning 10.9 percent lower. Looking ahead, as more discouraged traders with short positions leave the market the bias is for further sterling strength.
The ratio of longs to shorts in USD/CHF is -1.36, which is within the extreme +/- 3 range. The ratio flipped to net short on Tuesday coinciding with a rally from 1.2420 to 1.2550 in the currency pair. Total positioning is unchanged as short positions rise by 78 percent and long positions fall by 37 percent. The ratio confirms the downside bias in the EUR/USD signal.
The ratio of longs to shorts in USD/JPY is -2.02, which is within the extreme +/- 3 range. The ratio has growing more net short since last Tuesday when the ratio flipped from net long back to net short. Total positioning is up by 21 percent as long positions rise by 18 percent and short positions rise by 22 percent. Looking ahead, speculative positioning favors carry traders and dollar longs.
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