Hello everyone,
I am new to this particular forum.

One of the main reasons why i find myself posting on this forum is that it would seem that "sentiment" has become an increasingly popular buzzword when discussing financial markets, and especially the currency markets.

What does "sentiment" in the markets mean to you? Is it just describing the general expectations of the market in terms of peoples emotions? Or does it mean something different?

Also, how can we use "sentiment" to trade? Now would seem like a good idea to understand sentiment a little more, as in trading, you can never know to much and never will get close to knowing enough!

Thanks

Bertie

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He's in Spain for a conference. He'll be back next week.

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John Kicklighter is the author of Dynamic Carry Trade Basket, Watch What The Fed Watches, and Forex Trading Weekly Forecast on DailyFX.com

Hi everyone,

I've got some COT data on the euro, from 2000 to now. The COT Index using data from 2000 to now is showing lowest reading ever, a bearish extreme. Speculators are extremly short and Commercials are extremly long. So I'm expecting a turn soon on EUR/USD. There's a chance that we could go lower, because the % long speculators (=non commercial) ratio isn't below 10 yet (but it is at a low which hasn't been reached since 2000), nonetheless a rally is close by. Using the 52 weeks index we seem a simular picture.

Greetings,
Jeremy

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Certainly valid points. You can see similar charts for other major pairs in Jamie's weekly COT report:

US Dollar Could Top on Overextended Forex Futures Positioning

Across the board it seems that traders have become overextended on US Dollar-long positions, and it seems only a matter of time before they begin to unwind pent-up dollar demand.

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David Rodriguez is the author of Forex Trading Signals and Forex Trading Weekly Forecast on DailyFX.com.

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okay- a few things ive learned through the years of fxing -

go with the trend & dont try and guess when the trend is over

BUT.......

did anyone else see the USD turnaround signs? Not really a strong one with GBP - but a perfect trendline touch on EUR, almost a double top reaction spike on CHF.

All pairs showed serious rection spikes today - without surpassing former lows/highs

Kind of like slamming the brakes on your car.

Wonder if Mon Asian market will dump lots of cash in - or wait because of light US trade week?

Will the slow trade week basically reset all the indicators and make this one giant bull/bear trap?

Set yr stops close ~

Thoughts?

Well I didn't catch this post until today, but it seems like you had quite the prescient observation here. Across the board we see the US Dollar and Japanese Yen substantially off of their trend highs. I personally believe that currencies will remain volatile on a short-term basis but remain within longer-term ranges. This is something I write about here: Currency Trading Market Conditions Difficult to Forecast: Look for Good Range Trading Strategies

My reasons are many, but in a nutshell I believe that markets can only move as strongly as they have for so long. To see that the EURUSD trended from 1.60 to 1.2300 in such a short amount of time tells you that a good deal of consolidation may be necessary before further big moves.

The fact that interest rate differentials are compressing will only diminish trend strength, and I feel that overall market conditions suggest we're not going to break recent range highs or lows any time soon. Of course, a 1.34-1.23 range is still plenty big.

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David Rodriguez is the author of Forex Trading Signals and Forex Trading Weekly Forecast on DailyFX.com.

Hello everyone,

I realize I've been a bit MIA on this forum for the past couple of months, but I'd really like to cultivate discussion on forex sentiment--especially as it relates to our own Speculative Sentiment Index report

Forex Sentiment Forecasts further Japanese Yen and US Dollar Strength

I tend to get a lot of questions about the SSI, and I think it would be great if everyone posted their questions here--because you're not the only one with questions about it. So be sure to check out the most recent SSI report and let me know what you think.

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David Rodriguez is the author of Forex Trading Signals and Forex Trading Weekly Forecast on DailyFX.com.

What symbols (or tickers) represents risk reversal rate data on Bloomberg?

Andrius_S

If it's on the Bloomberg terminal, just hit VM <GO> and select which currencies you'd like to see.

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David Rodriguez is the author of Forex Trading Signals and Forex Trading Weekly Forecast on DailyFX.com.

Written by David Rodriguez, Quantitative Analyst
Full Article

EURUSD – Euro Forecast to Rally Against US Dollar
USDJPY – Japanese Yen to Continue Gaining against USD
GBPUSD – British Pound Forecast Remains Aggressively Bearish
USDCHF – Swiss Franc Forecast to Drop Further on Forex Sentiment
USDCAD – Canadian Dollar Expected to Decline Against USD

While the SSI is available once a week on DailyFX.com, you can receive SSI readings twice a day in DailyFX Plus Forex Intraday Trading Signals. The SSI sought a EURUSD rally since 1.26 and was signaling a reversal around 1.60.



Historical Charts of Speculative Forex Trading Positioning



USDCHF – A massive US Dollar/Swiss Franc rally has invited aggressive USD/CHF selling, and our contrarian indicator gives signal that the pair may continue to rally. The ratio of long to short positions in the USDCHF stands at -2.68 as nearly 73% of traders are short. Yesterday, the ratio was at 1.34 as 57% of open positions were long. In detail, long positions are 41.1% lower than yesterday and 12.0% weaker since last week. Short positions are an incredible 111.5% higher than yesterday and 79.8% stronger since last week. Open interest is 24.2% stronger than yesterday and 23.8% above its monthly average. The SSI is a contrarian indicator and signals more USDCHF gains. Our forex trading signals are accordingly long the USD/CHF.



How do we interpret the SSI? The FXCM SSI is based on proprietary customer flow information and is designed to recognize price trend breaks and reversals in the four most popularly traded currency pairs. The absolute number of the ratio itself represents the amount by which longs exceed shorts or vice versa. For example if the EURUSD ratio is 2.55, long customer orders exceed short orders by a ratio of 2.55 to 1. Conceptually similar to contrarian analyses using the CFTC IMM open position data or COT Report, the SSI provides an alternative approach that is both more timely and accurate in forecasting currency price movement. The SSI is a contrarian indicator that tells you how the market is weighted and where the trend may head. More long positions don't necessary suggest more confidence in the direction of the current trend. In general, when traders start having adverse movements against their position, many tend to increase the size of their position with the purpose to average down their entry price in one last attempt to recover from previous losses. However, the higher the number of short orders in a bull market the more dangerous is to take additional shorts because many of those traders who just entered the markets are also leaving their protective stop losses just above the current price action.

Have any further questions about the SSI and forex positioning data? Ask the author David Rodríguez on our forex forum.

We love getting feedback on our reports. Tell us how we’re doing: E-mail the author of this report at drodriguez@dailyfx.com.

I read all previous articles and I think over the long term, it does work
but short term it does not, so it depends on your time horizon, but those SSI indications are just from the FXCM traders not the market over all, so how many traders on FXCM as #% to the retail market? probably very low?

Actually there are enough traders active at FXCM to make this a good representation of the mood of each currency pair. But you are right in that this is not meant for short-term trading. Also, it is not a timing indicator. I think of this report as showing the strength of the daily trend of each pair covered. When the ratio gets to +3 or -3, I start to pay attention as that is a good indication of a strong trending move developing on the daily chart. You can then use any other form of analysis to help you time your entry on a shorter-term chart, but would not recommend using a chart shorter than the hourly. I think the 4-hour chart plays nicely with this data. A strong directional bias in the big picture can be of great help to traders though, you just have to have an approach to find your entry and exit. But the SSI can increase your chance of success by allowing a trader to concentrate on looking for buys or looking for sells. When we trade with the momentum of the market, everything else can fall into place nicely.

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Seems that the fibonacci thread isnt around anymore. Could someone help me with this question?

In regards to the Weekly GBP/USD chart i have posted below - Im having a hard time with the definition of " most recent high to low" -

Would it be from #1, where I have initiated my fibo tools from?

Or # 2 ?

Any help would be appreciated as I am trying to set my limits.

Thanks!

Dear Jamie and David,

Thank you for your explanation about sentiment index. I really learn a lot about that
I have question: why dailyfx do not include JPY crosses (GBPJPY, EURJPY etc) in SSI? I see they put JPY crosses in trading signal and technical analyzer and i can not see the reason why they do not put it in SSI as well.
It will give a extremely valuable information for trading.

Thank you before

regards,

Ryan

Hello eveyone, I'm new to the forum
I look forward to sharing and exchanging information with everyone!
I have been watching the forum for a while and I just decided to join and participate!
See ya...