Is the U.S. dollar still a target for the Fed?
The U.S. dollar opened the last week of 2010 at 80.985 and dropped to 79.288 on the last trading day of the year. Last year, on the close of the last trading week of 2009, the U.S. dollar was at 78.220. Through 2010 we saw the U.S. dollar hit a high the week of July 7 at 89.315 and a low at 77.081 the week of Nov. 1. Looking at the charts below you see the daily chart has technicals favoring the bears, which started six trading days ago.
Proceed to Page 2 for the latest COT data...
COT data
On the weekly chart you see very little activity with the COT report. Last week we saw the commercials in a net short of 7,016 contracts down from 7,262 contracts the previous week. The 52-week low of 46,250 contracts net short was hit the week of Feb. 5 and the 52-week high of 2,587 net long was hit on Oct. 8. Starting in late August, the Fed started strongly posturing for a weaker dollar, and since they control this we saw what happened. This week we have had some very solid economic reports from the U.S. manufacturing sector and China announced on Jan. 1 a slow-down in manufacturing. No doubt this news had a positive effect on the U.S. dollar. One chart below you really want to view is the correlation between the U.S. dollar and the CCI CRB Index. See when the CRB Index hit its high last? Look where the dollar was. Now that we are seeing another peak in the CRB Index, the U.S. dollar is nowhere near where it was. Can you imagine where the CRB Index goes if in fact the Fed has its way and pushes the dollar back down to 71? I can’t.
Hope everyone reading this has a happy, healthy and prosperous 2011!
| Commodity |
12-mo low |
12-mo hi |
3-Jan |
27-Dec |
| Cattle (feed) |
-2,917 |
7,100 |
2,534 |
2,347 |
| Cattle (live) |
-73,179 |
-18,177 |
-42,259 |
-43,601 |
| Hogs |
-38,039 |
836 |
-9,201 |
487 |
| Corn |
-394,553 |
119,389 |
-394,553 |
-371,984 |
| Oats |
-5,822 |
829 |
-5,822 |
-5,761 |
| Soybeans |
-203,215 |
56,797 |
-203,215 |
-186,802 |
| Soybean meal |
-90,487 |
-6,350 |
-73,749 |
-75,270 |
| Soybean oil |
-111,786 |
32,394 |
-87,730 |
-83,818 |
| Wheat |
-16,413 |
82,654 |
-11,689 |
-3,724 |
| Orange juice |
-21,746 |
-6,588 |
-16,635 |
-16,468 |
| Coffee |
-47,729 |
-4,637 |
-41,500 |
-41,521 |
| Cocoa |
-49,897 |
8,586 |
-18,265 |
-14,754 |
| Sugar |
-241,259 |
-104,983 |
-216,482 |
-214,952 |
| Cotton |
-69,857 |
-12,970 |
-37,600 |
-41,326 |
| British pound |
-31,274 |
97,211 |
20,420 |
11,124 |
| Canada dollar |
-105,107 |
-13,109 |
-61,599 |
-50,851 |
| Euro FX |
-62,835 |
124,494 |
27,527 |
13,833 |
| Japanese yen |
-52,533 |
92,866 |
-23,849 |
-2,369 |
| Swiss franc |
-33,169 |
27,482 |
-25,021 |
-19,908 |
| US dollar index |
-46,250 |
2,587 |
-7,016 |
-7,262 |
| Mexican Peso |
-118,008 |
-14,488 |
-88,096 |
-83,068 |
| Australian dollar |
-102,706 |
-10,793 |
-84,969 |
-79,150 |
| S&P 500 |
-88,893 |
33,981 |
-41,537 |
-41,972 |
| T-note -10 yr |
-74,761 |
356,573 |
138,833 |
139,745 |
| T-bond -30 yr |
-43,324 |
158,206 |
43,365 |
56,294 |
| Eurodollar |
-1,179,414 |
105,872 |
-184,615 |
-148,471 |
| Crude oil |
-200,484 |
-23,057 |
-198,611 |
-191,281 |
| Heating oil |
-69,179 |
7,568 |
-60,994 |
-57,369 |
| Unleaded gas |
-91,597 |
-10,453 |
-80,805 |
-83,590 |
| Natural gas |
111,345 |
179,433 |
159,768 |
159,430 |
| Copper |
-35,704 |
1,793 |
-35,147 |
-35,704 |
| Gold |
-302,740 |
-207,691 |
-259,770 |
-251,808 |
| Platinum |
-32,628 |
-15,759 |
-29,067 |
-27,327 |
| Silver |
-65,413 |
-37,800 |
-50,891 |
-47,057 |
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.
Proceed to Page 3 for this week's detailed fundementals charts...
Fundamentals
The dollar index remains near the middle of its month-long consolidation range between its recent 3-1/4 month high and one-year low. The dollar index will finish the year slightly higher by +2.0%. The euro is moving sideways between $1.30 and $1.35, modestly above last month’s 3-1/2 month low, while the dollar/yen rose to a 1-1/2 month high, just below last month’s 15-year high.
Bullish factors for the dollar include:
- The ECB’s recent action to allow €13 billion of reserves to remain in the banking system after its purchase of €73.5 billion bond purchases, which amounts to quantitative easing and is bearish for the euro.
- The unexpected downward revision in Q3 French GDP.
Bearish factors for the dollar include:
- The report from the ECB that November European private sector loan growth rose +2.0% y/y, the fastest pace of growth since April 2009.
- Reduced safe-haven demand for the dollar as global stock markets rallied and investors shifted funds out of dollars and into riskier assets.
Fundamental Outlook – Bear Market Correction – The dollar index ended the year in correction mode because of the dollar-bullish factors of the European sovereign-debt risks, improved U.S. economic data, higher T-note yields and technical short-covering after the sharp four-month selloff. However, the dollar’s long-term bearish factors are likely to eventually reemerge and cause a resumption of the bear market because of the Fed’s far more expansive monetary policy than the ECB, negative short-term dollar interest rate differentials vs. the euro, the intractable U.S. account deficit and reduced demand for safe-haven dollars as the global economy and stock market pictures slowly improve.
