We have seen a daily “love-hate” relationship develop over the past year between the markets and the European Union’s handling of its debt crisis. Just look back to this past Thursday, the market “hated” what was coming out of the most recent summit, and on Friday the market “loved” what was coming out of the summit. Guess what is happening today? If you said “hate,” you are correct.
In these times, how do you trade the largest traded Forex pair, the EUR/USD? Well, first have a look at the daily chart below and you will see that last week this pair opened at 1.34350 and closed the week at 1.33810. ADX is at 28 and rising showing low strength developing in the most recent move down. MACD is below the signal line with very little divergence, reflecting very little momentum, and Stochastics are mid-range and look close to getting into oversold territory. Current price action shows the market is now at the bottom of its price range of 1.32000. We will want to see consecutive closes below this. Short-term top of the range looks to be at 1.35000. The red line shows a technical trade signal and Trends in Futures did recommend shorting this pair that day.
Proceed to Page 2 for the latest COT Data...
COT Data
So, can you see how big money is posturing in this market? Well no, not the pair itself, but you can see how big money is posturing in the individual currency futures contracts. On the weekly charts below I have highlighted how big money is posturing and how it affects the euro FX and the U.S. Dollar Index futures contracts. Knowing this information when trading the forex pair will give you an advantage over forex traders who do not read and understand this vital information. View the weekly charts below and if you need help understanding how to use the new COT report, I would be happy to send you my new book “What Lies Beneath All Trends,” with an added currency section. Just shoot me an email at Gary@TrendsinFutures.com.
|
Commodity |
12-mo low |
12-mo hi |
9-Dec |
2-Dec |
|
Cattle (feed) |
-1,290 |
5,543 |
1,192 |
826 |
|
Cattle (live) |
-44,824 |
10,437 |
-28,655 |
-29,801 |
|
Hogs |
-46,574 |
21,270 |
-41,930 |
-35,594 |
|
Corn |
-413,915 |
-57,341 |
-57,341 |
-78,847 |
|
Oats |
-7,738 |
-353 |
-563 |
-353 |
|
Soybeans |
-203,260 |
28,178 |
27,839 |
24,414 |
|
Soybean meal |
-84,656 |
31,746 |
31,746 |
28,729 |
|
Soybean oil |
-117,444 |
29,745 |
26,282 |
29,745 |
|
Wheat |
-32,577 |
82,335 |
70,997 |
76,415 |
|
Orange juice |
-22,341 |
-9,769 |
-14,004 |
-13,955 |
|
Coffee |
-45,699 |
-4,655 |
-10,053 |
-7,782 |
|
Cocoa |
-41,808 |
7,949 |
7,949 |
7,633 |
|
Sugar |
-221,694 |
-36,220 |
-41,175 |
-36,220 |
|
Cotton |
-46,785 |
-2,761 |
-8,292 |
-2,761 |
|
British pound |
-66,435 |
88,682 |
61,186 |
63,904 |
|
Canada dollar |
-115,190 |
25,942 |
16,678 |
24,739 |
|
Euro FX |
-124,855 |
137,842 |
123,743 |
137,842 |
|
Japanese yen |
-64,864 |
76,983 |
-32,255 |
-35,347 |
|
Swiss franc |
-42,387 |
20,852 |
20,852 |
16,563 |
|
US dollar index |
-53,158 |
14,003 |
-36,851 |
-35,601 |
|
Mexican Peso |
-140,414 |
39,901 |
24,358 |
39,901 |
|
Australian dollar |
-110,025 |
479 |
-30,954 |
-7,741 |
|
S&P 500 |
-87,896 |
73,398 |
-43,197 |
-14,739 |
|
T-note -10 yr |
-8,493 |
229,611 |
-1,859 |
-8,493 |
|
T-bond -30 yr |
-20,389 |
88,803 |
24,544 |
15,730 |
|
Eurodollar |
-408,407 |
1,126,194 |
903,316 |
1,126,194 |
|
Crude oil |
-319,669 |
-114,385 |
-183,841 |
-177,830 |
|
Heating oil |
-66,097 |
-4,204 |
-32,047 |
-35,479 |
|
RBOB Gasoline |
-85,987 |
-38,417 |
-60,835 |
-52,116 |
|
Natural gas |
108,160 |
228,910 |
148,625 |
154,335 |
|
Copper |
-36,201 |
14,419 |
7,724 |
9,606 |
|
Gold |
-287,634 |
-159,153 |
-201,500 |
-193,545 |
|
Platinum |
-35,249 |
-18,670 |
-23,926 |
-23,405 |
|
Silver |
-57,793 |
-18,774 |
-22,519 |
-20,688 |
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 U.S. Dollar Index remains underpinned from the European debt crisis and is moderately below October’s 10-3/4 month high. EUR/USD fell to a one-week low after the ECB cut its two-week refinancing rate 25 bp as expected to match the record low of 1.00%, while USD/JPY rallied to a two-week high and is moderately below the all-time high of 75.35 per dollar. Bullish factors include:
- The ECB’s efforts to avert a credit crunch by introducing three-year loans for banks, cutting banks’ reserve ratios to 1% from 2% and loosening criteria for loans by reducing the rating threshold on asset-backed securities banks may use for collateral.
- S&P’s action to put the debts of 15 EU countries on review for possible downgrade, depending on the results of the Dec. 9 EU summit, along with its warning that the European Financial Stability Fund (EFSF) may lose its top credit rating if any of its guarantors have their own debt grade lowered.
- Concern that the European debt crisis may linger after an official from German Chancellor Merkel's government said it was more pessimistic over the outcome of this week’s EU summit
Undercutting the dollar was reduced dollar demand from European banks after the three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, fell to a three-week low of -114 bp below the euro interbank offered rate.
Fundamental outlook — Short-term neutral — The trend in the dollar remains neutral as safe-haven demand has stalled while awaiting the outcome of the Dec. 9 EU Summit. Any renewed European sovereign debt risks or additional Bank of Japan intervention against the surging yen, though, may rekindle the dollar’s bullish trend. However, the dollar’s long-term trend remains bearish because of the poor U.S. economic and fiscal outlook, the Fed’s extraordinarily easy monetary policy and the intractable U.S. current account deficit.
Have a prosperous trading week.
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