For the month of December, the March 2013 U.S. Dollar Index opened at 80.345, hit a high of 81.055, a low of 79.015 and closed at 79.871. The last week of trading saw the dollar climb to almost re-test 80. The reason for the climb was the fiscal cliff. You can see from today’s price action how the dollar is responding to Congress passing a budget to bring the fiscal cliff drop that started on Dec. 31 to a halt on Jan. 1.
Proceed to Page 2 for the latest COT Data...
On the weekly chart below you can see how the sell side of the market, Dealer/Intermediary in the COT Disaggregated report, were posturing net long throughout the drop back in 2011 when the U.S. dollar went from trading just over 81 in the beginning of 2011 to testing 73 at the end of April 2011. This past year, the price action of the U.S. Dollar did not seem to like being below 79. As of the last COT report of 2012, Dealer/Intermediary were net long 9,635 contracts. Asset Managers were net short -4,718 contracts as were Leveraged Funds -10,406 contracts. Other Reportables were net long 5,925 contracts. Note ADX on the weekly chart is at 22, weak weekly trend.
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...
You may find the 10-year monthly chart below more interesting, especially looking at the growth in volume over the past five years. Check out the lows hit below 72 back in 2008. Same year, if you recall, we saw crude oil trading at $147 per barrel. Now take a good look at the incredible climb from below 72 in July 2008 to above 88 in October 2008! I am still waiting for someone to explain to me how crude oil dropped more than $100 in almost the same time. Remember the term “peak oil?”
So I am hoping you can see what you need to keep an eye on to position yourself for another potentially large drop in the U.S. dollar. I have no doubt Bernanke would not mind seeing this because it would raise our exports. Did you see what China did with soybean orders from the U.S. in the past three weeks? Moving their business to Brazil, is it for better pricing? The only thing is countries like Japan are also racing to lower their currencies. The new prime minister in Japan ran on a platform of lowering the yen and has done a great job so far, especially if you are short. And let’s not forget about the euro. Does the ECB really want a strong euro? And will gold hit $2,000 in 2013? I may answer that question in the next Market Pulse.
HAPPY NEW YEAR!
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