By DailyFX – US Dollar Index: Implied net positioning continues to decline and is now at -170,752.

Net positioning… … is inching towards where it was when
bottoms were formed in December 2005, June 2006, and November 2004. Our
commercial interest index is at 100, which is extreme;y bullish. The
last 100 reading was in early December 2006 when the EURUSD topped out
at 1.3364 and fell 5 figures (500 pips). We are expecting the dollar to
begin at least a multi week rally in the next few weeks.

EUR: Although the EURUSD has reached all-time highs, positioning is not
at an all-time high. Since market turns almost always occur at
sentiment extremes, additional upside potential remains.

GBP: Speculative longs are at yet another record this week. Sentiment
is undountedly extreme (to the bullish side), therefore we expect a
reversal, especially in GBPUSD (due to the commercial interest index
being at 100 for the greenback).

CHF: CHF short positions continue to decrease from extreme levels,
signaling that the CHF should strengthen for an extended period.
Sentiment is improving and the outlook for the CHF remains bullish.

JPY: JPY net positioning is little changed this week. The chart above
shows that the previous two records of extreme bearishness led to
reversals. The psychological backdrop is ripe for a reversal again so
be on the lookout for a top in the JPY crosses, especially the GBPJPY
and CADJPY.

CAD: Net positioning regarding the CAD is little changed but
positioning remains extreme. The commercial interest index is at 6
after registering 1 the week before. These are the lowest levels since
the last week in June, first week in July of 2006, when the USDCAD began
its rally from 1.1000 to 1.1875. The CAD is in the process of forming a
top (USDCAD bottom).

AUD: Net positioning in the Aussie increased from 65,158 to 68,256
last week. There is little evidence that the Aussie is topping out.
Tops are almost always accompanied by extreme positioning and
positioning is not at a bullish extreme (similar to the euro). There is
no reason to believe that the Aussie may form a top this week.

DailyFX Research Team
Forex Capital Markets LLC
32 Old Slip, 10th Floor
New York, NY 10004
Tel (212) 897-7660
Fax (212) 897-7669
E-mail: research@dailyfx.com