Monday, March 1, 2010

US Dollar Update

The U.S. Dollar Index has traced out an interesting harmonic pattern since the late November early December 2009 low which suggests that caution may be warranted. Click for Dec 09 update on the US Dollar.
  • The recent high is a 1.618 extension of the initial thrust from the low that peaked at approximately 78.50 in the third week of December.
  • The rally has been contained within a parallel trend channel--spending the majority of the time in the upper 1/2 of that channel which currently is coincident with the important 21 day exponential moving average.
  • The current 55 and 200 day exponential moving averages are near the level of the December peak and coincident with the lower band of the rising trend channel.
  • There is also a time harmonic where 'X' (low to low) equals 'Y' (low to recent high)
  • Conventional technical indicators are suggesting that momentum is waning: RSI is not confirming recent advance in the USD and the MACD is turning down while the 'MACD Signal' has crossed into negative readings.
  • The Commitment of Traders Report (02-23-2010) indicates that larger traders and small traders are net long the USD while commercials are net short the USD.





(1) Large Traders (2) Small Traders (3) Commercial


Total OI
Long Short Long Short Long Short

USD
Index
Contracts: 60,454
43,461
4,985
5,751
2,567
7,718
49,378
Change:
-769
-1,953
-2,934
51
341
1,079
1,771
% Open Interest:

71.9
8.2
9.5
4.2
12.8
81.7
Analysis: There were no significant shifts in the open interest (OI) in the reporting period. The large spec traders are now a 8.7 to 1 long in this market, increasing their net long by covering shorts. Small traders are a modest out of balance long but are not big players in this market.
click chart to open in new window

A break below the center channel and 21 ema would be a sign of weakness in the USD, while a break of the 200 day ema and lower channel and Nov-Dec peak would be an outright bearish indicator. If you are long the USD it is a time for caution.

No comments: