GBPUSD - The ratio of long to short positions in the GBPUSD stands at 1.49 as nearly 60% of traders are long. Yesterday, the ratio was at 1.45 as 59% of open positions were long. In detail, long positions are 0.9% higher than yesterday and 69.0% stronger since last week. Short positions are 1.6% lower than yesterday and 11.5% weaker since last week. Open interest is 0.1% weaker than yesterday and 13.6% above its monthly average. The SSI is a contrarian indicator and signals more GBPUSD losses.

USDJPY - The ratio of long to short positions in the USDJPY stands at 1.53 as nearly 60% of traders are long. Yesterday, the ratio was at 1.28 as 56% of open positions were long. In detail, long positions are 14.8% higher than yesterday and 8.6% stronger since last week. Short positions are 3.9% lower than yesterday and 7.2% stronger since last week. Open interest is 6.6% stronger than yesterday and 11.1% above its monthly average. The SSI is a contrarian indicator and signals more USDJPY losses.


Source: FXCM Execution Desk, Sample Size: 25000 Traders

For historical data and the latest charts based on the SSI please visit http://www.dailyfx.com/story/strateg...353412325.html

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.

GBPUSD - 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 1.45 as 59% of open positions were long. In detail, long positions are 1.5% lower than yesterday and 65.0% stronger since last week. Short positions are 4.2% higher than yesterday and 6.2% weaker since last week. Open interest is 0.8% stronger than yesterday and 14.6% above its monthly average. The SSI is a contrarian indicator and signals more GBPUSD losses.


USDJPY - The ratio of long to short positions in the USDJPY stands at 1.27 as nearly 56% of traders are long. Yesterday, the ratio was at 1.28 as 56% of open positions were long. In detail, long positions are 5.8% higher than yesterday and 0.0% stronger since last week. Short positions are 6.6% higher than yesterday and 18.9% stronger since last week. Open interest is 6.1% stronger than yesterday and 10.7% above its monthly average. The SSI is a contrarian indicator and signals more USDJPY losses.


Source: FXCM Execution Desk, Sample Size: 25000 Traders


For historical data and the latest charts based on the SSI please visit http://www.dailyfx.com/story/strateg...353412325.html

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.

Despite the recent easing on financial conditions the outlook for the carry trade strategy remains very bearish. Short term interbank lending rates remain well above government bond yields of similar maturity and the repeated injections of liquidity by the world’s most important central banks are failing to restore confidence in the global financial system.

Last week, the DailyFX Dynamic Carry Trade Portfolio was down by 71 pips in capital but accumulated an additional $87 per basket on interest payments. The most lucrative trade was the position we held in the Australian dollar with 111 pips gain in capital appreciation plus $20 on interest payments accumulated along the last 5 days. Yet, all of those gains were offset by the losses in the long position we held in the Sterling against the U.S. dollar (-361 pips).

Thesis:

If Sterling is about to fall against the USD, and USD is itself "setting up for a big fall" against the JPY, then it follows that Sterling is about the fall out of its medium term range to major support, and it's time to get aggressive to the downside.


Major Premise #1

(1) Yen will strengthen against the USD, as soon as it touches the trendline;

Evidence:

SI says that traders are net long USD/JPY to a substantial degree, and Jamie Saetelle says that USD/JPY is "setting up for a big fall."

Major Premise #2

(2) Sterling is about to resume fall again against the USD.

Evidence:

SSI and Jamie's charts.


The question is, "When to get in?"

Answer:

If you plot out the fib retracement lines on the range boundaries which were established between the 14NOV07 high and the 23NOV07 low, it is apparent that GBP/JPY broke out of a triangular wedge on 19DEC07 at 2340 hrs. Friday's retracement back up towards the triangular boundary line is just that. The 12DEC07 spike to 230.34 was a sweet short entry, analogous to the August rallies in GBP/AUD and EUR/NZD, which preceded the best short trades in years. At any rate, SSI and Jamie's observations about the big picture suggest that it's all south from there for GBP/JPY.

A decent aggressive entry point now is 226.85. Why? That is the 61.8 % retracement of the 12DEC07 high and 20 DEC07 fall-out-of-the-triangle-wedge low. A little more conservative is the 61.8 % retracement at 227.75.

228.92 is the 38.2 % retracement of the top of a right shoulder in a head and shoulder's pattern that has been developing on the 4 hour chart.

Here is a question though:

Doesn't this bode even MORE bearish for EUR/JPY? There are fundamental reasons to think so. For one thing, the ECB is joining central banks around the world in pumping liquidity into the markets. That means that Mr. Trichet's hawkish talk is just that: Talk. As soon as the market figures that out, Euro will fall against Sterling, and all the above arguments which have sparked sterling's recent dollar humiliation will hit the euro with a vengeance. EUR/GBP will fall; EUR/USD will visit its 200 days MA (at least, see Sterling) and perforce, EUR/JPY will fall with vengeance.

Sorry I have no charts. I am not smart enough to upload them.

mr Sousa i'm not sure if this is the place to ask this but here goes:in your article on friday Hedging Strategy with 400 pips in Profit you stated Go both long and short at the market if the price is at any level within the 1.63-1.67 range.i did so on a demo account. I noticed after doing so when one lot is to the good the other loses pips i figure i must be doing somthing wrong. also you stated (Long stop below 1.60 and short stop above 1.70) why so far out trading on a mini account i guess i wouldn't be able totrade this way. if you could help me understand or point me in the right direction i would appreciate it.

happy holidays
kevin

jsgehrke, I like your thoughtful, logical way of looking at this. I agree that Trichet is basically just paying lip service as he tries to manage inflation expectations. However, in regards to monetary policy, the GBP is in a similar situation. The BOE has already started cutting, and while they continued to cite concerns about inflation, there is little doubt that their bias is a dovish one. As a result, I think the best way to play drops in EUR and GBP is in the the JPY crosses. I generally watch GBPJPY the most, and I agree that there is huge downside potential for the pair. However, I suppose it's just a matter of preference and comfort...regardless, there's money to be made somewhere

The carry trade is simply on a short term hiatus while the greenback shakes loose some further unwanted baggage. Expect volatility but don't purchase any gravestones. Also, go bullish on CAD/JPY in the short term. It may surprise you, despite the "fundamentals".

I suppose I should've mentioned it in my last post, as I have frequently in the GBPJPY forum, but my downside bias for yen pairs like GBPJPY is for the longer-term. I do think that there is upside risk in the near-term, which will simply create the opportunity to get in at a better price for a GBPJPY short.

Here is the thing, Terry. I am not trying to turn this into a EUR/GBP forum, but we both know that it's impossible to think about any of the crosses without thinking about all of the crosses. We both agree that the Bank of England is doing what the ECB is going to have to do, which is, to cut rates. Recent price action has been driven by a DECEIVED FX market, which has been pricing in an adjustment in the interest rate differential between Europe and the UK. Consequently, Euro has moved to the upside against the GBP, and will continue to do so until the market finds its balance.

The question is, what is going to define the top of the new range? The answer is that we should be on the lookout for some fundamental news, preferably near a big figure handles, that queers expectations for the Eurozone. That's the short, and when it happens, watch out. It will affect all the yen crosses.

I absolutely see what you're saying and why you're focused on EURJPY so much more, and I think we essentially have the same conclusion (yen crosses will tank). Furthermore, while a clear shift to a dovish bias by the ECB will undoubtedly lead Euro lower, I think the yen pairs could topple before then. Who knows how long it will be before ECB President Trichet stops going on and on about price stability. Sure, I will pay attention to what he's saying/doing, as it is extremely pertinent, but I don't want to wait for the ECB to be the trigger. I want to keep the price action as my primary focus while leaving the fundamentals in the back of my mind.

Hi there,

I am presently doing some of my own research into the impact yield differnetials have on the currency market. I am looking for some historical data and i was hoping someone here could tell me a good source to find historical gov't bond yields for several countries (CHF, EUR, etc...)

Thanks for the help

Last week, the DailyFX Dynamic Carry Trade Portfolio was down by 351 pips. The most unprofitable trade was the position we held in the British pound with 241 pips gain in capital appreciation offset by $28 on interest payments accumulated along the last 5 days. Looking ahead, the current circumstances favor a further unwind of carry trades which could benefit lower yielding currencies like the Japanese yen and the Swiss franc. In fact, like we said in our Watch What the Fed Watches weekly report, despite the recent easing on financial conditions, confidence among traders in all the measures adopted by central banks to fight the credit crunch remains very poor. Short term interbank lending rates remain well above government bond yields of similar maturity and what the market needs is more transparency regarding the true amount of the losses related with the U.S. subprime market collapse.

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Antonio, do you mean that those who entered the fund three week ago are now in a heavy loss?

Hi grandmaster,
checking the history on this forum today I saw your posting. I had also been watching cad/jpy for a couple of weeks (its decline) and waited for a break lower. I wondered what made you suggest in late Dec that we could see a short term bullish move. The pair has now dropped continuously from the 26th Dec which I believe is the date of your posting. Being new to this I appreciate all knowledge whilst I learn how to more clearly analyse myself.
rob

Hi Pippy.

A great source for a wealth of (mostly US) economic data can be found at the St. Louis Fed here.

I don't know of any good sources of foreign bond yields available for free, unfortunately, but Economagic comes close with LIBOR data for specific currencies here.

Hope that helps, and feel free to discuss anything interesting with us. I very much enjoy working with all things quant, so I would be very interested in anything that the data tells you.