US Dollar Forecast Bearish, but Watch for Sentiment Shifts

EURUSD – Euro Forecast Modestly Bullish versus US DollarGBPUSD – Trading Strategies Flat on Indecisive Price ActionUSDJPY – Japanese Yen Forecast to Gain Further against USDUSDCHF – Swiss Franc Trading Bias Remains BullishUSDCAD – Canadian Dollar Expected to Gain vs. US Dollar
While the SSI is available once a week on DailyFX.com, you can receive SSI readings twice a day in DailyFX Plus forex tntrady trading system
It has been a challenging week for forex sentiment-based currency trading, as extremely indecisive markets have given us mixed signals for short-term US Dollar trading. Just several days ago, our SSI-based trading strategies were aggressively long the US Dollar on clearly one-sided crowd sentiment. Yet the Greenback’s dramatic reversal forced many of our systems to cover positions. The more recent shift in sentiment generally points to further USD losses. Yet we have limited conviction in our short-term forecasts on indecisive sentiment. We would ideally wait for clarification in short-term price action before taking aggressive bets on major currency pairs.

Historical Charts of Speculative Forex Trading Positioning
EURUSD – Euro price action has remained extremely choppy as of late, and indecisive forex market sentiment leaves short-term forecasts somewhat unclear. 56% of traders are currently short the EURUSD, giving us an SSI ratio of -1.28. This is a fairly noteworthy shift from just two days ago when the majority of traders were long. In detail, long positions are 3.4% lower than yesterday and 8.6% weaker since last week. Short positions are 9.1% higher than yesterday and 3.5% weaker since last week. Open interest is 3.3% stronger than yesterday and 1.0% below its monthly average. The SSI is a contrarian indicator and the net-short crowd gives contrarian signal to buy the EURUSD. Yet we would warn that price action remains extremely choppy, and short-term direction is far from clear.

GBPUSD –Sideways trading in the British Pound/US Dollar has produced wide swings in forex market sentiment, leaving our short-term bias somewhat unclear. The ratio of long to short positions in the GBPUSD stands at 1.37 as nearly 58% of traders are long. Yesterday, the ratio was at 1.55 as 61% of open positions were long. In detail, long positions are 8.0% lower than yesterday and 5.3% weaker since last week. Short positions are 3.6% higher than yesterday and 16.1% weaker since last week. Open interest is 3.4% weaker than yesterday and 4.4% below its monthly average. The fact that the majority of traders remain short gives us a modestly bearish contrarian bias, but the very recent swing towards short positions effectively moderates our view.

USDJPY – Short-term forecasts for the US Dollar/Japanese Yen currency pair remain bearish, but indecisive price action limits our conviction on USDJPY positions. The ratio of long to short positions in the USDJPY stands at 1.60 as nearly 62% of traders are long. This is effectively unchanged from yesterday, and the net-long trading crowd bias gives us contrarian signal to go short the pair. In detail, long positions are 4.5% higher than yesterday and 4.3% stronger since last week. Short positions are 8.9% higher than yesterday and 19.1% weaker since last week. Two of our sentiment-based trading strategies remain short the USDJPY through recent price action.

USDCHF – The majority of traders remain long the US Dollar against the Swiss Franc, giving us contrarian bias to go short the currency pair. The ratio of long to short positions in the USDCHF stands at 2.00 as nearly 67% of traders are long. Yesterday, the ratio was at 1.82 as 64% of open positions were long. In detail, long positions are 11.4% higher than yesterday and 14.4% weaker since last week. Short positions are 1.0% higher than yesterday and 3.1% stronger since last week. Open interest is 7.7% stronger than yesterday and 3.5% below its monthly average. The SSI is a contrarian indicator and signals more USDCHF losses.

USDCAD – The vast majority of retail speculators remain long the US Dollar against the Canadian Dollar, and our contrarian strategies remain short USDCAD on crowd sentiment. The ratio of long to short positions in the USDCAD stands at 2.82 as nearly 74% of traders are long. Yesterday, the ratio was at 2.91 as 74% of open positions were long. In detail, long positions are 0.4% higher than yesterday and 13.3% weaker since last week. Short positions are 3.5% higher than yesterday and 11.5% weaker since last week. Open interest is 1.2% stronger than yesterday and 12.1% below its monthly average. The SSI is a contrarian indicator and signals further USDCAD losses.

GBPJPY – Forex trading crowd sentiment on the British Pound/Japanese Yen currency pair remains very indecisive, and our short-term forecasts are accordingly mixed. The ratio of long to short positions in the GBPJPY stands at 1.19 as nearly 54% of traders are long. Yesterday, the ratio was at 1.13 as 53% of open positions were long. In detail, long positions are 6.8% higher than yesterday and 9.4% stronger since last week. Short positions are 0.8% higher than yesterday and 12.3% weaker since last week. Open interest is 4.0% stronger than yesterday and 2.5% below its monthly average. The SSI is a contrarian indicator and signals more GBPJPY losses, but we would ideally wait for clearer crowd bias before taking a firm position on the GBPJPY.