Is the U.S. dollar headed for its 2008 low? “Big money” could be saying yes.

COT Data

This past week we saw Commercials come in at 6,816 contracts net-long (52-week high) and large specs came in at -7,088 contracts net-short. By analyzing the 5-year weekly chart below, you can see what will happen if Commercials continue adding to their net longs. Also, take a look at the weekly pattern that will complete if the dollar goes below 72. Currently, there is a lot of pressure pushing the dollar down. Something like the ECB raising rates even slightly could push the dollar down even further.

Of course, if we see the dollar at 2008 lows, can you imagine the cost of commodities? Oil with its “fear premium” (I don’t believe these predictions — you know “buy the rumor, sell the fact”) caused by the Middle East crisis. Grains are either near or at all time highs, softs too. So if we see the dollar continue its long-term strong downtrend, what exactly will these commodities cost as final products here in the United States?

Keep a sharp eye open for corporate profits of big oil; they will be staggering once again. And yes, commercials are at 52-week net-short lows in crude, and for the first time in 5-years of disaggregated data, our friends the swap dealers are actually net-short crude. Interesting isn’t it. Have a great week and remember to follow the trends.

Commodity	12-mo low	12-mo hi	4-Mar	25-Feb
Cattle (feed)	-2,917	7,100	1,334	1,164
Cattle (live)	-73,179	-18,177	-31,288	-32,658
Hogs	-38,039	836	-34,851	-34,777
Corn	-408,170	119,389	-405,010	-403,757
Oats	-7,738	829	-6,189	-7,738
Soybeans	-203,260	56,797	-136,125	-143,663
Soybean meal	-90,487	-6,350	-49,004	-56,059
Soybean oil	-117,444	32,394	-80,176	-66,681
Wheat	-32,577	76,473	-7,620	-10,008
Orange juice	-18,722	-6,588	-17,392	-16,687
Coffee	-47,729	-4,637	-34,961	-40,485
Cocoa	-38,511	8,586	-38,511	-36,942
Sugar	-221,694	-104,983	-181,856	-184,671
Cotton	-69,857	-12,970	-36,390	-41,880
British pound	-66,435	97,211	-39,233	-47,103
Canada dollar	-106,282	-13,109	-106,282	-101,129
Euro FX	-63,130	124,494	-63,130	-53,834
Japanese yen	-52,533	92,866	-31,862	40,480
Swiss franc	-33,169	27,482	-32,915	-18,403
US dollar index	-39,311	6,816	6,816	3,724
Mexican Peso	-120,059	-14,488	-102,818	-120,059
Australian dollar	-102,706	-10,793	-92,491	-84,193
S&P 500	-88,893	33,981	-20,549	-14,429
T-note -10 yr	-74,761	356,573	135,630	229,611
T-bond -30 yr	-43,324	151,936	50,037	55,190
Eurodollar	-1,179,414	105,872	81,781	-15,542
Crude oil	-319,669	-23,057	-319,669	-258,897
Heating oil	-66,097	7,568	-38,696	-50,406
RBOB gasoline	-91,597	-10,453	-74,294	-76,151
Natural gas	111,345	228,910	228,910	223,838
Copper	-36,201	1,793	-27,951	-28,534
Gold	-302,740	-193,197	-250,596	-231,806
Platinum	-34,909	-15,759	-32,380	-32,928
Silver	-65,413	-43,146	-56,460	-57,793

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.

If you need help understanding how to understand how to use the COT report to your benefit, please email me at Gary@crbtrader.com and put COT report in the subject line. Please include your name and telephone number in the email.

Proceed to Page 3 for this week's detailed fundementals charts...

Fundamentals

The dollar index fell to a 3-3/4 month low on the increased risks for an ECB rate hike. The euro climbed to a 3-3/4 month high and is near the upper end of its 14-cent consolidation range, while the dollar/yen hugs its 15-1/2 year high from November.

Bearish factors for the dollar include:

1. Hawkish comments from ECB President Trichet who said, “Strong vigilance is warranted” and an “increase of interest rates in the next meeting is possible.”
2. The European Commission’s upward revision in its 2011 Eurozone GDP and inflation forecasts.
3. Dovish comments from Fed Chairman Bernanke who said a "sustained period of strong job creation" is needed to ensure a solid recovery and that interest rates will stay low for an "extended period."

Bullish factors included:

1. Renewed European sovereign-debt concerns after Standard & Poor's maintained a negative credit watch outlook on Greece's and Portugal's debt, saying the debt ratings for both countries remain at risk of being cut.
2. Comments from Richmond Fed President Lacker who said an early end to the QE2 asset-purchase program may be needed to limit inflation pressures.

Fundamental Outlook — Bearish — The dollar index hit a new 3-3/4 month low, failing to gain much safe-haven support from the Middle East crisis and instead succumbing to downward pressure from the hawkish ECB policy. The dollar does have some bullish factors because of strong U.S. economic growth and the possibility of renewed European debt crisis events. However, the dollar’s long-term outlook remains bearish 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. current account deficit and reduced safe haven demand for dollars as financial crisis fades.

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