FXCM’s Speculative Sentiment Index (SSI) is a powerful indicator of market sentiment that has been pointing towards dollar losses for several days now.

The SSI ratios for the major pairs show that more FXCM traders are long the dollar than are short. The SSI can help you trade against the crowd. It is signaling US dollar weakness, which may indicate a decline in the US dollar.*

You can follow the value of the dollar through the Dow Jones FXCM Dollar Index (INDEXDJX: USDOLLAR). This easy-to-use index tracks the US dollar against four of the world’s most liquid currencies—the euro, British pound, Japanese yen, and Australian dollar—giving traders and analysts instant insight into the broad trends in the US dollar.

Dow Jones FXCM Dollar Index since January 1, 2011.  Source: FXCM Marketscope Charts

FXCM has recently developed the Dow Jones FXCM Dollar Index Basket, which closely tracks the Dow Jones FXCM Dollar Index.  The index basket was developed to allow forex traders to trade their opinion on the US dollar without needing to choose a specific currency to trade against. The index basket can easily be traded on an FXCM demo account by buying or selling the symbol “USDOLLAR.” FXCM plans to offer USDOLLAR trading on live accounts in the near future.

FXCM Inc.’s (NYSE: FXCM) Speculative Sentiment Index (SSI) shows retail trader positioning in the forex market. By following the SSI, you can see how many traders are entering or exiting the markets. The SSI has a strong history as a contrarian indicator and can be used as a currency forecasting tool. By following trader positioning in a currency, the SSI can be used as a tool to see whether the recent moves in that currency are merely a correction or if they are likely to lead to a larger trend*.

FXCM’s Speculative Sentiment Index has been gaining popularity among traders, analysts, and other currency watchers as a way to gauge forex market sentiment. Now it can also be used as an indicator for the US Dollar, as shown in the Dow Jones FXCM Dollar Index.

If you have a live FXCM account, you can check the SSI twice a day inside DailyFX+ and get a deeper understanding of forex market sentiment. The SSI is also available every Thursday on DailyFX.com.

*Please be advised that past results and/or performance is not indicative of future results.