Last week, with the help of QE3, the December 2012 U.S. Dollar Index opened at 80.400 and closed the week at 78.987. The USD has not been below 80 since the first week of May 2012. The only way we would see the USD rise this week was for Eurozone to experience negative news over the weekend, and sure enough that is what we are seeing.
On the daily chart we see ADX at 52.6 reflecting a very strong downtrend. The DI Differential found on the TS Analyzer is at 33.75. MACD is bearish and Stochastics are in deep oversold territory.
Proceed to Page 2 for the latest COT Data...
On the weekly chart we see Dealers adding a small increase to net short now -23,007. Leveraged Funds increased net long to 17,608 and Asset Managers have continued dropping net long now at 666. Will we see the USD drop below 78.500? Strong possibility, but over the weekend we have seen grumbling from Europe regarding its multi-year debt crisis. Who will win this week: The Eurozone debt crisis or the Fed's QE3?
If you need help understanding how to understand how to use the NEW COT report to your benefit get instant access to my new e-book "What Lies Beneath ALL Trends". It is filled with eye opening information.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...
Look very closely at the monthly charts below and you can see a very clear picture regarding what will happen if the USD does freefall. The 10-year monthly charts show the USD Index at 120 back in 2002 and the CCI at 180. Look at the extreme low of the USD and the extreme high of the CCI back in July 2008. See where crude and gold were trading back then. Now look at December 2008 and see where crude and gold were trading then, just five months later. My concern here is where commodities are trading now and where they will be trading if the USD retests 74 or 72. Now trading crude was great back in 2008. However, the toll high commodity prices will take on average Americans is just not good. So keep an eye on where the USD is heading and be prepared for all-time highs in commodities if the USD continues its slide.
Have a prosperous trading week.
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