Thursday, April 24, 2008

Euro SSI Flips For The First Time Since 2006

A disappointing German Ifo business climate index and better than expected jobless claims in the U.S. let to a 2 cent decline of the euro against the dollar today. The Federal Reserve is expected to cut another 25 basis points at its meeting next week and according to Greg Ip to hold off any further reductions in the fed funds target rate. Fed funds futures contracts on the Chicago Board of Trade indicated an 82 percent chance the U.S. central bank will lower its 2.25 percent target lending rate by quarter percentage point next week.

It has finally happened. The EURUSD Speculative Sentiment Index flipped to a net positive reading of 1.14. Encouraged by a sharp yet steady drop in the pair below a major rising trend, this momentous shift in positioning offers the first signs of a major reversal after more than two years of a solid bull trend. With nearly 53% percent of traders holding long positions, this reading is still somewhat weak, but no doubt reflects early profit taking on breakout trades and overrun limit and stop orders.

click to enlarge

In our opinion this is a positioning trade. The SSI signal has to be confirmed in order to make this a real fundamental shift.

source: Fed Weighs Pause After Next Rate Cut
By Greg Ip , WSJ

source: Euro SSI Flips For The First Time Since 2006

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