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US Dollar (chart attached) still playing with a possible bottom. Last rally
penetrated the steepest green line and rallied to the shallower green line,
failed to hold, declined to nominal new low, reversed sharply and is up against
the trendline again. The low hit a Gann target to the tick. The Commitment of
Traders is bullish and momentum indicators are showing bullish divergences in
daily, weekly, and monthly charts. I've been talking about a (counter-trend)
dollar rally correction for a couple of months and I think we may have the lows
in for now ... could be good for 10-15%.
No sign of weakness yet in A$, however C$ broke down, held low just above
the December low, and rallied into critical resistance at .7648. I have
been lightly long C$ since the bounce started, however any weakness will
cause me to reverse to full short for a minimum target of .72.
Euro is mirror image of US$ ... I'm considering establishing a scale-in
short position.
Yen is interesting ... Japanese are spending (printing) billions to buy
treasuries to support the Dollar. All that money is barely managing to keep the
Yen from appreciating strongly. This is a continuation of heavy BOJ intervention
during 2003. My best trade of 2003 was to bet against the BOJ by going long the
Yen futures at a retracement low near 75. Currently trading 95 area and
I've been watching for an opportunity to do it again, however I need a
retracement for acceptable entry risk.
Many commodities have been supported by speculative buying from hedge funds
and US$ weakness. Light Crude, in particular, has traded counter to the dollar
decline. Commitment of Traders shows the Commercials as heavily net short
many of the commodities. This may be a good time to reassess risks and risk
tolerance.
Earl
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