The latest readings from our Speculative Sentiment Index (SSI) show that retail traders remain aggressively short the SPX500 contract which tracks the S&P 500. Since SSI is a contrarian indicator, this points to further record peaks.
Past performance is not necessarily indicative of future results.
Warning signs on a potentially significant turnaround are everywhere, but as long as the crowd continues to sell in anticipation of a peak we’re unlikely to see an important turnaround.
SSI is posted every Thursday on DailyFX.com and twice every weekday on DailyFXplus.com
US Dollar Rallies on Better than Expected Change in Nonfarm Payrolls
US non-farm payrolls for April saw the biggest rise in three months and gave the US Dollar a major boost against most of the other major currencies.
USD/JPY 4-Hour
Past performance is not necessarily indicative of future results.
The change in payrolls was reported at 165 thousand, beating expectations for 140 thousand and higher than the revised 138 thousand rise in jobs seen in March. The unemployment rate was reported at 7.5% in April, the lowest rate since December 2008, and better than expectations for the unemployment rate to remain at 7.6%. Average hourly earnings rose 0.2% in April.
THE TAKEAWAY: US Change in NFP Payrolls beats expectations at 165K for April -> Unemployment rate falls to a four year low of 7.5% -> US Dollar rallies
The US Dollar rose about 100 points against the Japanese Yen, rising above 99.00 for the first time in a week. USD/JPY may next see resistance around 100.00, which hasn't been broken in four years. Support may continue to be provided around 97.00.
Past performance is not necessarily indicative of future results.
The SSI-based trading signals on DailyFX PLUS are currently placing opposing trades on USD/JPY. The Range2 system is selling the pair, while the Momentum2 system is buying. These trading signals are available as automated strategies at FXCMapps.com
Weak Data Increase Chance of Aussie Rate Cut Tomorrow
When you set the filters on the DailyFX Economic Calendar to show only high importance events, you can see that the RBA rate decision at 04:30 GMT tomorrow is the first important announcement scheduled in a relatively light week. As such, it will be covered by the DailyFX analysts as it happens in the Live Trading Room.
The Australian Dollar underperformed in overnight trade, sliding as much as 0.5 percent against its leading counterparts, after a disappointing set of economic data increased the probability of an interest rate cut at tomorrow's RBA policy meeting though consensus is still for rates to remain unchanged.
Past performance is not necessarily indicative of future results.
Retail Sales unexpectedly fell 0.4 percent in March and the HSBC China PMI gauge fell to the lowest level since August 2011, warning of slowing performance in Australia's largest export market.
The Reserve Bank of Australia made history last night cutting its key benchmark interest rate to an all-time low at 2.75%, a 25-bps rate cut from 3.00% that generally surprised market participants. According to Bloomberg News, of the 29 economists surveyed, 21 had expected a hold.
Past performance is not necessarily indicative of future results.
Needless to say, the bit of surprise has provoked some shuffling out of the Australian Dollar today, which has fallen to under 1.0200 against the US Dollar.
Past performance is not necessarily indicative of future results.
Readings from the Speculative Sentiment Index (SSI) said that traders were net long AUD going into the RBA rate and have since added to their long positions.
Past performance is not necessarily indicative of future results.
Since SSI is a contrarian indicator, the SSI-based trading signals on DailyFX PLUS have been short AUD going into the RBA rate cut and additional signals to go short have been added since.
Past performance is not necessarily indicative of future results.
These trading signals are available as automated strategies at FXCMapps.com
SSI: AUD/USD Could Slip Back to Yearly Lows as Retail Fades Sell-off
The RBA rate cut spurred a break of the 1.0200/20 level, and sellers have indeed been inspired to continue the push towards yearly lows just above 1.0100. As a contrarian indicator, the latest readings from the Speculative Sentiment Index (SSI) on DailyFXplus.com complement the bearish technical bias.
Past performance is not necessarily indicative of future results.
Prices are testing support at 1.0181, the bottom of a range that has contained the pair since late July 2012. A break below that targets the bottom of a Falling Wedge chart pattern at 1.0137, followed by the March 4 low at 1.0114.
Past performance is not necessarily indicative of future results.
Formerly broken channel bottom resistance is at 1.0231. A push back above that eyes the Wedge top at 1.0309.
Forex Trading Crowds Bet on US Dollar Bounce - Trades Look Attractive
The latest readings from the Speculative Sentiment Index (SSI) show that FX trading crowds are long the US Dollar (ticker: USDOLLAR) against all majors except the Australian Dollar. Those positions might work out well as the USD bounces off key support.
Past performance is not necessarily indicative of future results.
Since SSI is a contrarian indicator, such one-sided sentiment would normally leave us in favor of Greenback weakness, but low forex market volatility expectations suggest the USD is unlikely to break lows.
Dow Jones FXCM Dollar Index
Past performance is not necessarily indicative of future results.
Instead we're broadly in favor of buying any significant US Dollar declines as long as it continues to hold key lows versus the Euro and British Pound.
Past performance is not necessarily indicative of future results.
The SSI is available free twice a day on DailyFX PLUS for all FXCM live account holders. The public can also view a weekly SSI report on Thursdays on DailyFX.com
Yesterday I commented that DailyFX analysis was "broadly in favor of buying any significant US Dollar declines as long as it continues to hold key lows versus the Euro and British Pound." Today, we see that the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) is in the midst of one of its best upswings of the year, gaining over +1.50% since the European Central Bank meeting on Thursday.
EUR/USD
The uptrend off of the March and April lows broke yesterday with fervor, and further downside pressure today has the EURUSD well on its way towards 1.3000 and below.
Past performance is not necessarily indicative of future results.
Should price close below the late-April swing low, there is light support in play until the 50% Fibonacci retracement off of the July 2012 low and February 2013 high at 1.2875/80.
USD/JPY
The break of 99.95 has led to a sharp move up into the mid-100.00s, and at the time of writing, the pair had surged up towards 101.60.
Past performance is not necessarily indicative of future results.
With the Bullish Ascending Triangle in play, I’m now looking for a move towards 102.00, then a small pullback before the march towards 103.50 begins. I’m bullish and long from 99.95 and 100.19.
AUD/USD
The AUDUSD has been crushed the past few days as market participants have overlooked the strong April Australian labor market reading, and instead are focusing on the renewed easing cycle that the RBA has entered.
Past performance is not necessarily indicative of future results.
Between the RBA’s rate cut yesterday and the decision to lower the 2013 growth and inflation forecasts, the AUDUSD has slipped below range support at 1.0110, dating back to last July.Now, a test of parity is in line, which would be the first such appearance of a sub-1.0000 exchange rate since June 28, 2012. We're bearish and short from 1.0150.
Dollar Thunders Higher, Traders Positioned for Further Strength
Traders have spoken: the Euro, Japanese Yen, Australian Dollar, Swiss Franc, and other major currencies have broken decisively lower against the resurgent US currency. The Dow Jones FXCM Dollar Index (ticker: USDOLLAR) trades at 3-year peaks.
Past performance is not necessarily indicative of future results
On Friday, the DailyFX analysts updated their trading biases as forex volatility prices surged, and indeed they still like buying into US Dollar strength across the board.
1-Month Volatility Prices across Major Pairs versus Japanese Yen Pairs
Past performance is not necessarily indicative of future results
Past performance is not necessarily indicative of future results, but this surge in volatility prices leaves us broadly in favor of our volatility-friendly Breakout2 trading system as well as our trend-following Momentum2 strategy.
Past performance is not necessarily indicative of future results
These trading signals are available as automated strategies at FXCMapps.com
Why is the Australian Dollar Falling and Why Might it Fall Further?
The Australian Dollar has tumbled to 11-month lows despite record-highs in the US S&P 500—what gives?
AUD/USD typically trades quite closely to stock market prices and broader risky asset classes, but recent S&P gains haven't been enough to forestall a sizeable Aussie Dollar sell-off. The chart below helps explain the breakdown in the correlation between the AUD and S&P.
AUD vs S&P 500, Gold and Yields
Past performance is not necessarily indicative of future results.
The material breakdown in the S&P 500/Aussie correlation can subsequently be explained in terms of yields—the AUDUSD simply doesn't offer the same interest rate differential it once did. We're left with a correlation that actually trades near multi-year peaks.
AUD vs 2Yr Aussie Govt Bond Yield
Australian Dollar/US Dollar Exchange Rate (lhs) 2-Year Australian Government Bond Yield (rhs) Past performance is not necessarily indicative of future results.
The year-long correlation between the AUD/USD and Aussie yields trades helps explain the Asia-Pacific currency's break from the S&P 500. Further declines in domestic yields could force AUD weakness regardless of what's going on in the S&P and broader 'risk' markets.
Past performance is not necessarily indicative of future results.
The Speculative Sentiment Index (SSI) data on DailyFX.com show retail FX traders recently hit their most long the Australian Dollar against the US Dollar on record, and indeed sentiment remains extremely one-sided. Since SSI is a contrarian indicator, we remain plainly in favor of selling into AUD/USD weakness until further notice.
Our strategy biases likewise remain almost exactly unchanged since Monday as volatility prices continue to surge year-to-date peaks.
Here are our signal outlooks and volatility percentiles for major currency pairs--the AUD/USD, USD/CHF, and NZD/USD seem especially likely to see big moves.
Huge Week for Forex Markets, but Even Bigger Moves Coming Soon
What a difference a week makes. Retail FX traders went from buying aggressively into Dollar weakness to being universally short USD across the board. We like buying for that same reason.
Weekly Summary of Forex Trader Sentiment and Changes in Positioning
Past performance is not necessarily indicative of future results.
Last week we wrote that traders remained short Euro, British Pound, and Japanese Yen against the downtrodden Greenback, but a substantive shift in sentiment and market conditions has effectively reversed our SSI-based forecasts.
Past performance is not necessarily indicative of future results.
We like buying the US Dollar across the board as volatility prices surge and retail traders do the opposite—particularly against the Australian Dollar and Swiss Franc. You can see the full SSI charts for all the majors at DailyFX.com
The Dow Jones FXCM Dollar Index (ticker: USDOLLAR) is a great asset used to determine USD direction. Today we will review trading breakouts with the current USD trend. So far for the 2013 trading year the index has advanced over 7.9% after breaking through key resistance at 10,000.
Savvy traders using this index for guidance can then plan for breakouts on the USD pair of their preference. Since our bias is towards the USD increasing in value, traders will look to buy the USD/JPY on a breakout of resistance.
The easiest way to take advantage of a breakout is through setting an entry order outside of resistance and above the previous high. In the event that price breaks through our pre-defined barrier our order will execute, positioning us to take advantage of the USDOLLAR trend.
US Dollar Breaks Out - Here's How We Like Playing It
The US Dollar surge seems like the beginning of a much larger move, and our volatility-friendly and trend-following trading strategies look attractive in the week ahead.
1-Month Volatility Prices across Major Pairs versus Japanese Yen Pairs
Past performance is not necessarily indicative of future results.
While past performance is not necessarily indicative of future results, our sentiment-based breakout and momentum trading signals have usually performed better with higher volatility. On the other hand, the range trading strategies tend not to do as well.
DailyFX Individual Currency Pair Conditions and Trading Strategy Bias
Past performance is not necessarily indicative of future results.
DailyFX trading signals are available as automated strategies at FXCMapps.com
We're happy to have you on the thread discussing the DailyFX trading signals and analysis. However, if you want to post your own analysis without joining in on the discussion, there are other threads for this, or you can start your own.
The U.S. dollar gained ground versus most major rivals Tuesday, with investors awaiting remarks from a pair of Federal Reserve policy makers a day ahead of congressional testimony by Fed Chairman Ben Bernanke.
Past performance is not necessarily indicative of future results.
The Dow Jones-FXCM Dollar Index (ticker: USDOLLAR) is 0.38 percent higher from the open after moving 86 percent of its average true range, and the rebound may gather pace ahead of the FOMC Minutes as we see a growing discussion to taper the asset purchase program.
Past performance is not necessarily indicative of future results.
Beyond the FOMC Minutes, we also have Fed Chairman Ben Bernanke scheduled to testify in front of Congress tomorrow at 14:00 GMT, but the central bank head may refrain from saying anything new as the committee sticks to its highly accommodative policy stance.
Past performance is not necessarily indicative of future results.
It was interesting to see that comments from Fed dove Charles Evans sparked a bullish reaction in the dollar as he struck an improved outlook for the U.S. economy, and we may see the USDOLLAR continue to mark fresh highs over the near to medium-term as the central bank drops its dovish tone for monetary policy.
USD/JPY Hits Four and a Half Year Highs as Bernanke Hints of "Taper"
Federal Reserve Chairman Ben Bernanke took to the hill today to respond to questions in front of a congressional testimony. His prepared statement was quite dovish. On the labor market specifically, he said:
"Despite this improvement, the job market remains weak overall: The unemployment rate is still well above its longer- run normal level, rates of long-term unemployment are historically high, and the labor force participation rate has continued to move down."
However, during the Q&A portion, Chairman Bernanke said that the pace of QE3 could be slowed over the course of the "next few meetings", sending equity markets into a tailspin, and the US Dollar surging across the board. The USDOLLAR rallied from a low of 10759 to as high as 10852, as the USD/JPY hit a four and a half year high above 103.60.
Past performance is not necessarily indicative of future results.
The Tidal Shift Strategy has since given a signal to buy USD/JPY. The system recommends entering this trade at any price between 103.272 and 103.748. The 14-period Average True Range on a daily chart is 0.19, so the trailing stop loss has been set at 102.559.
Past performance is not necessarily indicative of future results.
Tidal Shift is a trend trading strategy that aims to catch shifts in trend using trader sentiment as an indicator. The strategy looks to buy when the Speculative Sentiment Index reaches its lowest value for the past 145 trading hours, and looks to short when it reaches its highest value for the past 145 trading hours. The system is available for automation for all FXCM Trading Station accounts via the Mirror Trader platform.
SSI: Shift in USD/JPY Sentiment Favors Further Downside
We use our Speculative Sentiment Index (SSI) as a contrarian indicator to price action, and the fact that the majority of traders are long USD/JPY gives signal that the pair may continue lower.
Past performance is not necessarily indicative of future results.
The ratio of long to short positions in the USDJPY stands at 1.45 as 59% of traders are long. Yesterday the ratio was 1.22; 55% of open positions were long.
Past performance is not necessarily indicative of future results.
Long positions are 11.0% higher than yesterday and 30.5% above levels seen last week. Short positions are 6.8% lower than yesterday and 24.7% below levels seen last week.
Past performance is not necessarily indicative of future results.
The trading crowd has grown further net-long from yesterday but unchanged since last week. The combination of current sentiment and recent changes gives a further bearish trading bias.
Euro Remains Poised for Further Losses on ECB Policy
The Euro regained its footing today, with EUR/USD bouncing back from an overnight low of 1.2882, but the single currency may struggle to hold its ground ahead of the next European Central Bank (ECB) interest rate decision on June 6 as the Governing Council maintains a dovish tone for monetary policy.
Past performance is not necessarily indicative of future results.
As the ECB continues to push into uncharted territory, the policy outlook is likely to produce further declines in the EURUSD, and the head-and-shoulders formation may continue to take shape in the days ahead as it retains the range-bound price action carried over from the previous week.
Past performance is not necessarily indicative of future results.
As the pair appears to be carving a lower top just below the 1.3000 handle, we are still looking for a move back towards the 23.6% Fibonacci retracement from the 2009 high to the 2010 low around 1.2640-50, and we may see the bearish setup play out in the month ahead as the interest rate outlook deteriorates.
The Tidal Shift Strategy on DailyFXplus.com has just given a signal to buy EUR/USD. The system recommends entering this trade at any price between 1.29437 and 1.29887, with a trailing stop at 1.28763.
Past performance is not necessarily indicative of future results.
The signal was issued because our Speculative Sentiment Index (SSI) has hit its most extreme negative level for the past 145 trading hours at -1.2423, which suggests that the EUR/USD could be trending upwards.
This strategy can be automated on all live FXCM Trading Station accounts via the Mirror Trader platform.
