This indicator suggests the US Dollar is going much higher
US Dollar Index:
Sentiment for the greenback heightened in the
week as reflected by the U.S. dollar index. Bouncing off of the 86.00 figure
earlier in the month of September, the index has risen to hit above 90, a
three-month high. Suggestive of the rise, dollar implied positioning rose almost
six fold in the week ending September 27th. Previously at 6,685 contracts,
dollar bulls have pushed higher to 35,796 contracts as bearish undertones were
furthered in the Swissie and Yen underpinning dollar favoritism. Comparatively,
Canadian dollar bulls took away what could have been an across the board sweep
for the U.S. dollar. Dollar index open interest dipped another 1,075 contracts
to 17,573.
EUR:
Continuing for another period, euro short
positioning grew in the week. Short side sellers increased positions to 34,530
contracts compared to last week’s 30,480 as long side buyers increased to
32,927. As a result of the incremental shifts, Euro overall net non-commercial
positioning remains relatively unchanged at net short 1,603 contracts.
Previously net short at 1,428 contracts, the currency still portrays an
approximate 1.04 sellers to every 1 buyer. As a result, with the underlying
approaching the $1.2000 figure, current sentiment may be suggestive until
further direction can be established for a break in either direction.
GBP:
Vaulting by approximately 79 percent, short
sellers pounded the British currency lower on the week. Growing from 13,994
contracts in the previous week, shorts jumped to 25,018 contracts as long side
buyers remained incrementally changed at 27,581. Resultant of the strong shift,
net non-commercials have now declined from a strong 10,578 long bias to a mere
2,563 contracts. Ultimately this has depleted the long to short ratio to a 1.1:1
as the underlying continues to decline in light of small intermittences to
retrace. This now becomes a critical time in the underlying spot as technically,
we approach the 1.7500 figure and sentiment approaches neutral positioning. Open
interest remained healthy at 77,440 contracts.
CHF:
Short seller increased their coffers for the
week, bolstering weakness in the Swissie interest. Short positioning soared 49
percent in the week to 49,869 contracts from 33,398. In light of buying
initiatives increasing to the tune of 146 percent, overall bearish bias still
remains as net non-commercial positioning is now short 43,731 contracts. This
has now left, the once formidable 13:1 short to long ratio narrowed at an 8:1
figure. Such a sudden shift may now producing nascent suggestions of a near term
retracement in the underlying spot as we approach the 1.3050 figure. Open
interest rose to 76,757 contracts, up 19,559.
JPY:
Yen bearish bias dominated the week’s sentiment,
rising to 72,535 contracts, compared to last week’s 59,583. Comparatively, long
side interest rose incrementally to 13,469. This now leaves net non-commercial
positioning short overall by 59,066, raising the short to long bias to a 5.36:1
figure. Subsequently, open interest rose incrementally by 10,721 contracts to
138,571. With the underlying spot approaching a formidable resistance level, the
increased bearish sentiment may be just enough to spark further pushes downward
on the yen currency. This would ultimately be confirmed by a complete break of
the 113.00/50 levels, known to be protected by importers.
CAD:
Canadian dollar interest continued its uptrend
rising an additional 4,984 contracts to 50,520 on the long side. Fueled by
rising speculation and better prospects in the world’s eighth largest economy,
traders have continued to increase buy initiatives. As a result, short side
interest was pared back significantly, by almost 61 percent to 7,424 contracts.
This now leaves net non-commercials at a strong 43,096 contracts long, climbing
63 percent in the week. Although open interest dipped to 110,057 contracts, the
long to short ratio now resides at a lofty 6.8:1 compared to last week’s 2:1
figure, suggestive of further strength. However, a short retracement or
consolidation is likely to occur in the underlying following this explosion.
AUD:
Bulls ruled in the Australian dollar as the long
to short ratio remains enormously top heavy, printing an amazing 40:1 ratio.
Obviously leading the majors, long positioning dipped slightly to 23,527
contracts with a handful of shorts at 582 contracts. As a result, although
sentiment remains strongly bullish, net non-commercials dipped 37percent to
22,945 contracts. Subsequently, on a huge shift a slight retracement in the
underlying may be expected. However, with sentiment seemingly building again,
further rises may not be completely ruled out. Open interest remains strong,
although slightly narrowed to 63,181 contracts, down 15,541 in the week.
Richard Lee
Richard Lee is a Currency Analyst at Forex
Capital Markets. Employing both fundamental models and technical analysis
applications, Richard contributes regularly to DailyFX, Yahoo Finance and Comtex.
Prior to joining the research team, Richard was one of the senior instructors
for the FX Power Course, teaching thousands of traders the basics of currency
trading, technical analysis and how to implement trading strategies. He has
extensive experience in trading the spot currency markets, options and futures.
Richard previously traded FX, equity and equity derivatives for four years as
well as work for a private equity consortium before joining FXCM.