I know I covered the U.S. Dollar last week, but what I saw in the most recent COT Traders in Financial Futures report was too important not to cover.
Last week the December U.S. Dollar Index opened at 78.960 and closed at 79.398. Last weekend we saw negative news from Europe over their ongoing debt crisis, and this past weekend we saw more negative news as we saw a fresh crisis stalemate between Germany’s Merkel and France’s Hollande, with the biggest critic of bank oversight coming from the German Finance Minister Schauble. We will see added strength in the USD coming from this disagreement.
Looking at the daily chart below, you can see how from last week ADX went from 52.6 to 36.2 this week, reflecting a weakening trend (down). DI Diff is now at 4.94 with DI+ crossing up over DI- today. Last week DI Diff was at 33.75 with DI- well above DI+. MACD has dropped all divergence from below the signal line this past week and is now crossing up over the signal line. Stochastics are now correcting from oversold territory.
Proceed to Page 2 for the latest COT Data...
Take a real good look at what happened in the Traders in Financial Futures report. On the weekly chart you can see the large move and posture change by “big money.” Last week Dealers/Intermediaries were net short -23,007 contracts. This week they are net long 7,155 contracts. You do not have to look that far back to see where the USD was headed the last time this group was net long. Just look at the beginning of 2011 to see how the US Dollar Index dropped. Leveraged Funds last week were net long 17,608 contracts, this week net short -6,160 contracts and Asset Managers were seen dropping net longs last week at 666 contracts net long, this week they are net short -1,996 contracts.
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...
My view on this is clear: Big money is posturing for weaker U.S. dollars. However Europe’s ills will keep the USD rising, so we will want to view next Friday’s new COT report to see if big money posturing stalls on Europe’s debt crisis. If not, please note that when the U.S. Dollar Index drops, it will be extreme as the weight of “big money” pushing down on the U.S. dollar will be getting heavier. Now if more signs show a global economic meltdown, the world wide safe haven will be the U.S. dollar just like in 2008.
Have a prosperous trading week.
To see my market views daily you can follow me on Twitter at http://twitter.com/TrendsinFutures