More gains expected in GBP/USD

Latest Release Dated 08/03/06 (10:00 GMT)

· EUR/USD — Ratio Flips, Mild Retracement Signaled
· GBP/USD — More Gains in GBP/USD Expected 1.90 Now Likely
· USD/CHF — Carry Prompts Speculators to Remain Mostly Net Long for the Past Six Weeks
· USD/JPY — Ratio near Parity, Little Direction from SSI

The ratio of longs to shorts in the EUR/USD is 1.11, which is within the extreme +/- 3
range. As the SSI has correctly predicted, the EUR/USD rallied another 100 points from last Thursday’s
levels. Remember, the SSI is published as a weekly signal and we are looking for week to week moves so even though the EUR/USD first dipped before moving higher, over the past week, the ratio has remained net short and the currency quickly recovered to register even more
gains. Looking ahead however, the ratio flipped from net short to net long this
morning. Since the USD/CHF ratio is not confirming the EUR/USD signal, we are looking for only a modest retracement in the Euro at this
point. This is not surprising since the fundamental scale is still tipped more in the Euro’s favor after the latest rate hike from the
ECB. Total positioning has increased a modest 4 percent over the past week with a 29.6 percent rise in long positions and a 14.8 percent drop in short positions.

The ratio of longs to shorts in the GBP/USD is -2.31, which is within the extreme +/- 3
range. The ratio has remained net short for the entire week after flipping from long to short the week
prior. This has coincided with a 300 point rally in the GBP/USD that broke above our target of 1.88. Looking ahead, more gains are expected in the GBP/USD and with 1.90 at an arm’s length, traders could attempt to test that
level. Total positions have continued to climb, rising another 11 percent over the past
week. Long positions increased 30 percent to a 2 month high while short positions fell 17.0 percent.

The ratio of longs to shorts in USD/CHF is 1.61, which is within the extreme +/- 3
range. The ratio has now remained mostly net long for the sixth consecutive week and has correctly signaled that any losses in the EUR/USD would have been limited. The ratio has been becoming less net long however, which suggests that the support for the Euro may be
weakening. Overall, carry continues to be the main reason why traders prefer to be long dollars and short Swiss
francs. Total positions remained relatively unchanged, falling by a mere 0.1
percent. Long positions are lower by 2.6 percent while short positions are higher by 4.1 percent.

The ratio of longs to shorts in USD/JPY is -1.01, which is within the extreme +/- 3 range and virtually at
parity. The currency pair is slightly weaker than it was the week prior with total positioning remaining unchanged having risen by a mere 0.4
percent. Long positions are 25.7 percent higher while short positions are 16.3 percent
lower. Looking ahead, there is little that we can garner from the USD/JPY SSI signal as the currency pair sits between key support and resistance levels.