The FXCM Speculative Sentiment Index is an excellent tool to gauge trader positioning and sentiment in the FX market. Unlike major equities or futures markets, there is no single centralized exchange for forex trading. Such decentralized activity makes finding uniform volume or open interest data impossible. DailyFX fills the gap by offering access to FXCM’s proprietary volume and positioning information—giving an unparalleled view of forex market sentiment.

EURUSD – The ratio of long to short positions in the EURUSD stands at -1.31 as nearly 57% of traders are short. Yesterday, the ratio was at -1.25 as 56% of open positions were short. In detail, long positions are 4.4% lower than yesterday and 1.6% weaker since last week. Short positions are 0.1% higher than yesterday and 13.8% weaker since last week. Open interest is 1.9% weaker than yesterday and 4.3% below 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 -1.80 as nearly 64% of traders are short. Yesterday, the ratio was at -1.86 as 65% of open positions were short. In detail, long positions are 2.2% lower than yesterday and 0.7% weaker since last week. Short positions are 5.3% lower than yesterday and 2.2% stronger since last week. Open interest is 4.2% weaker than yesterday and 13.2% above its monthly average. The SSI is a contrarian indicator and signals more GBPUSD gains.

USDJPY - The ratio of long to short positions in the USDJPY stands at 4.52 as nearly 82% of traders are long. Yesterday, the ratio was at 4.57 as 82% of open positions were long. In detail, long positions are 1.5% lower than yesterday and 5.9% stronger since last week. Short positions are 0.5% lower than yesterday and 15.6% stronger since last week. Open interest is 1.3% weaker than yesterday and 25.6% 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 2.98 as nearly 75% of traders are long. Yesterday, the ratio was at 1.70 as 63% of open positions were long. In detail, long positions are 7.8% higher than yesterday and 25.3% weaker since last week. Short positions are 38.4% lower than yesterday and 5.2% weaker since last week. Open interest is 9.3% weaker than yesterday and 1.8% below its monthly average. The SSI is a contrarian indicator and signals more USDCHF losses.

USDCAD - ratio of long to short positions in the USDCAD stands at 1.91 as nearly 66% of traders are long. Yesterday, the ratio was at 1.66 as 62% of open positions were long. In detail, long positions are 9.1% higher than yesterday and 53.5% stronger since last week. Short positions are 4.8% lower than yesterday and 76.7% stronger since last week. Open interest is 3.8% stronger than yesterday and 75.4% 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 -1.02 as nearly 50% of traders are short. Yesterday, the ratio was at -1.23 as 55% of open positions were short. In detail, long positions are 9.0% higher than yesterday and 5.9% stronger since last week. Short positions are 10.1% lower than yesterday and 4.6% stronger since last week. Open interest is 1.6% weaker than yesterday and 11.2% above its monthly average. The relatively neutral SSI ratio gives few clues on to what to expect through short-term GBPJPY trading.

Continued US Dollar declines have been met with forex trading crowd buying, giving contrarian signal to stay short the USD versus the Euro, British Pound, Japanese Yen, Swiss Franc, and Canadian Dollar. Such one-sided crowd positioning underlines the extent to which the US Dollar has fallen and that short-term momentum remains firmly to the downside. Yet tomorrow’s US Nonfarm Payrolls report may very well prove pivotal for the short-term trajectory of the downtrodden USD. Several key Greenback pairs remain near key technical levels, and it will be critical to watch market reactions to said news event. Though overall momentum favors losses, direction can and change switch in an instant.

While central bank activity came and passed smoothly in London and Frankfurt today, the same can’t be said of the weekly jobs report on the other side of the pond. A revision higher to previous data and an unexpected jolt in the latest reading has once again created a pitfall for the dollar, which is losing ground across the board today with its index slumping another half percent. The turnaround comes despite an inspirational performance midweek caused by an equally unexpected expansion in core service sector activity in the United States. The ISM index breathed life back into a dollar frozen by fears that the Fed might have to resort to further stimulus measures. 

U.S. Dollar – The dollar index peaked around the first week in June and on the charts has created a 45-degree line lower ever since. Today’s 0.5% decline is pushing on a new low for the move dragging the greenback to its lowest in four months. However, the dollar appears to be surviving an early onslaught following the release of initial claims data. The market was sorely disappointed with a claimant count of 479,000 when a dip to 455,000 was written in pencil. Adding to the woe is the upwardly revised 460,000 reading of the previous week. Continuing claims, however, managed to dip by 34,000 to 4.537 million. This data is less reliable than it used to be given the extension of benefits distorting the overall reading. Still, the market was unable to take much comfort from that bigger picture view and the dollar continues to trade on the back foot in advance of the monthly employment report on Friday and next week’s FOMC meeting. Expect a crescendo of dollar shorts into the Fed meeting as dealers worry about the potential for further stimulus moves.

Japanese yen – The yen weakened overnight as local stock markets advanced and signs remained that risk appetite was growing. The dollar currently buys ¥85.89.

Euro – The ECB painted a picture of a healthily recovering economy past the second quarter as it left monetary policy static at 1% earlier today. The euro reached an intraday peak versus the dollar afterward and touched $1.3235 before profit-taking pushed it back to $1.3175. German factory orders for June rose 3.2% on the month to stand 24.6% higher than the previous year. A revision to May data almost eradicated the initially reported decline.

Aussie dollar – The Aussie reached a four-month high against the dollar overnight trading at 91.83 U.S. cents. Demand for commodities and rising regional stock markets helped encourage demand for high-yielders. The Aussie has pulled back to 91.23 following the initial claims data.

British pound – The Bank of England left policy unchanged at its monthly meeting today. The pound has met a wall of resistance at $1.5925 today and repeated failure has caused some follow-through selling to $1.5870.

Canadian dollar – Ongoing improvements in risk appetite and rising demand for commodity prices saw the Canadian dollar rise to within an ace of 99.00 U.S. cents for the first time since April. However, crude oil prices have reversed recent days’ gains and the worry over Friday’s employment report has forced bulls back on the defensive sending the loonie south to a low of 98.10 cents.

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Comment: A gentle downward-sloping ‘channel’ has dominated price action over the last year, sterling pushed lower by a very large weekly Ichimoku ‘cloud’. Prices are currently consolidating around 135.00 (61% Fibonacci retracement) having hit important support at the psychological level of 130.00 late May (low 126.70). The low in April 1995 was 128.20, ahead of January 2009’s record 118.80. Therefore during H2 2010 we shall continue to favour a very lengthy and tortuous basing process, ideally at 130.00/128.20 but without ruling out a sudden, sharp ‘spike low’.

A monthly close above 140.00 hints that an interim low might be in place.