U.S. dollar: Rising to the occasion
The U.S. Dollar Index has been sliding steadily since June and with Ben Bernanke’s help it slid further still between September and November. During this time, the falling dollar pushed commodity prices up. Since the dollar is the reserve currency, nearly everything priced in it saw a jump in price.
Many feel a dollar collapse is coming. If that would happen, it would send the prices skyward. U.S. dollar bears will have to wait a while. The dollar is on the rise. Why? The debt problems in Europe are getting much worse. Like last year’s fear from Greek debt pressures, the EU now is finishing Ireland’s debt woes, and Portugal and Spain are in focus. Some estimates show a Spanish bailout would cost seven times that of Ireland’s $133 billion bailout.
Looking at the daily, weekly and monthly charts below, you will see that the technical picture, along with a worsening debt crisis in Europe, could send the dollar much higher. This rally could send us to the red trendline on the monthly chart below – somewhere in the 86 area.
Proceed to Page 2 for the latest COT data...
COT data
Also look at the COT. The commercials have started adding to their net shorts at -14,140 contracts. Large spec are at 12,303 contracts net long.
Commercial Net Tracker instructions:
This form tracks the Commitment of Traders (COT) data for the commodity futures market. This form "looks" at the most recent five weeks of COT data and provides visual indications of the data. A. If the current value is at a 12-month low, the cell will display a red/burgundy background. B. If the current value is at a 12-month high, the cell will display a green background. C. If the current value went from net negative to net positive, the cell will display a blue background (indicating a bullish condition). D. If the current value is both a 12-month high and also went from a net negative to a net positive, the background will be green. You should view the data with green backgrounds to determine if they also went from net negative to net positive.
|
Commodity |
12-mo low |
12-mo hi |
26-Nov |
19-Nov |
| Cattle (feed) |
-2,917 |
7,100 |
3,933 |
4,969 |
| Cattle (live) |
-73,179 |
3,619 |
-47,560 |
-53,722 |
| Hogs |
-38,039 |
836 |
-2,517 |
836 |
| Corn |
-373,558 |
119,389 |
-315,890 |
-329,666 |
| Oats |
-5,208 |
829 |
-3,781 |
-4,034 |
| Soybeans |
-179,666 |
56,797 |
-166,778 |
-160,029 |
| Soybean meal |
-90,487 |
-6,350 |
-58,659 |
-57,225 |
| Soybean oil |
-111,786 |
32,394 |
-68,825 |
-75,467 |
| Wheat |
-16,413 |
82,654 |
31,005 |
27,963 |
| Orange juice |
-22,027 |
-6,588 |
-14,834 |
-14,469 |
| Coffee |
-47,729 |
-4,637 |
-37,049 |
-35,871 |
| Cocoa |
-49,897 |
8,586 |
-1,403 |
7,729 |
| Sugar |
-241,259 |
-104,983 |
-173,658 |
-174,349 |
| Cotton |
-69,857 |
-12,970 |
-46,678 |
-47,564 |
| British pound |
-31,274 |
97,211 |
-12,711 |
-27,231 |
| Canada dollar |
-105,107 |
-13,109 |
-42,686 |
-62,160 |
| Euro FX |
-62,835 |
124,494 |
-956 |
-17,555 |
| Japanese yen |
-66,127 |
92,866 |
-23,259 |
-18,887 |
| Swiss franc |
-37,855 |
27,482 |
-13,401 |
-14,221 |
| US dollar index |
-46,250 |
2,587 |
-14,140 |
-12,486 |
| Mexican Peso |
-118,008 |
-14,488 |
-91,873 |
-96,421 |
| Australian dollar |
-102,706 |
-10,793 |
-43,376 |
-50,130 |
| S&P 500 |
-83,827 |
33,981 |
-74,826 |
-71,049 |
| T-note -10 yr |
-74,761 |
356,573 |
14,837 |
-56,691 |
| T-bond -30 yr |
-43,324 |
158,206 |
22,188 |
-29,204 |
| Eurodollar |
-1,179,414 |
105,872 |
-392,938 |
-270,247 |
| Crude oil |
-198,943 |
-23,057 |
-165,622 |
-198,943 |
| Heating oil |
-69,179 |
7,568 |
-38,615 |
-62,269 |
| Unleaded gas |
-91,597 |
-10,453 |
-75,183 |
-74,594 |
| Natural gas |
110,310 |
179,433 |
127,606 |
131,212 |
| Copper |
-34,883 |
1,793 |
-25,426 |
-29,204 |
| Gold |
-308,231 |
-207,691 |
-263,893 |
-264,908 |
| Platinum |
-32,628 |
-15,759 |
-25,297 |
-26,649 |
| Silver |
-65,413 |
-37,800 |
-46,853 |
-45,654 |
Proceed to Page 3 for this week's detailed fundementals charts...
Fundamentals
The dollar index extended its three-week correction up to a two-month high from its recent 11-1/4 month low on short-covering and heightened European sovereign debt risks. The euro slumped to a two-month low against the dollar and the dollar/yen fell back to a 1-1/2 month low from its recent 15-year high.
Bullish factors center on:
- Increased safe haven demand caused by an escalation in the European sovereign-debt crisis after Standard & Poor's cut Ireland's long-term sovereign debt rating to A from AA- and its short-term rating to A-1 from A-1+ with a negative outlook.
- The surge in credit-default swaps insuring Portuguese and Spanish government debt to record highs.
- Comments from German Chancellor Merkel who said the euro is in an "exceptionally serious" situation.
Bearish factors for the dollar include:
- The unexpected increase in the November German IFO business climate to 109.3, its highest level since data began in 1991.
- Comments from Bundesbank President and ECB Council member Weber who said ECB’s bond purchases should be stopped “sooner rather than later.”
Fundamental Outlook: Bear Market Correction – The dollar index remains in upside correction mode driven by heightened European sovereign debt risks, improved U.S. economic data, higher T-note yields and technical short-covering after the sharp four-month sell-off. However, the dollar’s long-term bearish factors are likely to reemerge and cause a resumption of the bear market. These bearish fundamentals include the Fed’s far more expansive monetary policy than the ECB, negative dollar interest rate differentials vs. the euro, the intractable U.S. current account deficit and reduced demand for safe-haven dollars as the global economy and stock market picture slowly improve.
