Talking Points:
– Forex trading crowds remain aggressively long the US Dollar across the board, although profit taking may be occurring during the recent USD rally.
– Easing sentiment extremes warn that velocity of turnaround in price may have passed its apex.
– Continued reduction in US Dollar long positioning would warrant broader consideration for a major turnaround.
View individual currency sections:
EURUSD – Retail FX Reduces but Maintains Bearish Euro Bias
USDJPY – Bullish Dollar Breakout Hinges on Bearish Sentiment Easing
GBPUSD – New Lows for GBPUSD as Retail FX Takes Profit on Shorts
AUDUSD – Australian Dollar Showing Signs of Bullish Continuation
USDCHF – US Dollar at Potentially Significant Turning Point versus Swiss Franc
SPX500 – SP 500 May Run Higher as Markets Look Short on Fiscal Issues
Weekly Summary of Forex Trader Sentiment and Changes in Positioning
The US Dollar has rebounded from major lows across the board, and extremely one-sided retail forex sentiment easing suggests that we’ve seen an extreme in both price and positioning. The question now, if the bottom is in place, is “will the US Dollar rally further from here?” If trends in retail FX sentiment continue as they have developed over the past week, the answer might be “yes.”
As the US Dollar has made technical rebounds against a number of its major counterparts, including the British Pound and the Japanese Yen – two of the leaders against the US Dollar in recent months – retail FX positioning, bullish USD, has narrowed.
To be clear, retail FX has been correct in their bullish USD outlook. In the case of the EURUSD and the GBPUSD, the tick higher in the SSI ratio over the past week resulted from traders taking profit and flipping long (% change in long positions exceeded % change in short positions). Should positioning continue to move away from recent extremes, this emerging trend of a stronger US Dollar could continue.
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— Written by Christopher Vecchio, Currency Analyst for DailyFX.com
Contact Christopher via email at cvecchio@dailyfx.com.
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