Forex Market Sentiment: Traders Buying USD

Long US dollar positions increased among tastyfx clients as USD depreciated against most major currency partners in the last week; for example, USD/CAD fell from 1.38 on March 24th below 1.35 on April 3rd, and, in the same time, sentiment on USD/CAD went from 59% short to 64% long. Will tastyfx clients be proven right? Or will USD continue its decline?

Client Sentiment shows the percentage of tastyfx client accounts with open positions that are currently long or short. If the majority of client accounts with open positions are long a given market, then they expect the price to rise; if the majority is short, then they expect it to fall. (Values taken using tastyfx's Client Sentiment measure as of the previous day's close.)

Trend followers might go with sentiment, while contrarians would tend to go against the trend. For example, a 65% long measure in EUR/USD could reflect a buying opportunity for trend followers or a selling opportunity for contrarians.

EUR/USD - 61% Short

Last week's sentiment: 54% Short

It was only a few weeks ago that the majority of tastyfx clients were long EUR/USD, but the forex pairs ascent has caused a shift in sentiment. Euro has remained below 1.10 against the US dollar for all but a handful of days in the last year of trading; with the market just a penny or so below this level, traders look to a reversion or new normal in EUR/USD.

GBP/USD - 65% Short

Last week's sentiment: 54% Short

GBP/USD has quickly become the most shorted major pair as British pounds close in on the 1.25 level against US dollars. GBP's climb has coincided with increasing shorts among tastyfx clients in the currency as traders seem to think that the run-up to 1.25 will not hold.

USD/JPY - 57% Short

Last week's sentiment: 52% Short

Continued sideways price action between 130 and 135 for USD/JPY has resulted in relatively sideways changes to sentiment around the Japanese yen. Until JPY breaks in one direction or another, it seems as though sentiment will only shift subtly.

AUD/USD - 54% Long

Last week's sentiment: 72% Long

Australian dollars went from one of the largest long positions among tastyfx clients to as close to a 50/50 relationship as any major forex pair. AUD/USD bounced back from trading below 0.66 in early March to nearly surpassing 0.68 for the first time since February.

USD/CAD - 64% Long

Last week's sentiment: 59% Short

USD/CAD sentiment flipped from short to long covering more than 20% of ground along the way. The change in sentiment is coming on the heels of six days lower in a row for USD/CAD going into today. USD will bounce back against CAD at some point, but the question remains: from where?