Last week the intra-week peak-to-trough decline in the euro/dollarcross plunged by 4.2%, the 17th largest negative range since 2002. The overall week-on-week decline amounted to 3.32%. That was the largest decline since the first week of the year and the 9th largest since 2002.
Meanwhile, the bearish position held by non-commercials on the ICE U.S. dollar index dropped for a second straight report. Since peaking at a post-recession high of 15,494 short contracts on March 15th, bears have pared their position by more than half to just 7,116 contracts as of last Tuesday.
At the same time, financial speculators trimmed their overall length by 1.7% to 258,668 contracts. It goes without saying that a considerable amount of this length probably got exorcised out of the market last Thursday and Friday… and to that we say, good riddance, don’t let the door hit your backside on the way out.
Of course, as much as we would like to believe that happy times are here again, we are cautious of the likelihood that last week’s plunge in the commodities complex was related more to the direction of the dollar, than to the killing of Osama Bin Laden… all the obligatory USA, USA huzzah notwithstanding.
To this effect, unless the ECB is prepared to state it is leaving the main-refining-rate unchanged again this week, we might be in store for a rebound in the euro currency which means, should that event occur, we can expect a rebound in the energy liquids complex.
The other metric we will zero in on in this week’s issues of The Schork Report is the technicals. Last week the June contract blew through the 101.64 (62%) retracement level. That seems like a good enough jumping off point. That is to say, should the euro currency rebound this week, this is the first area of resistance we will target.
However, should the U.S. dollar continue to rally we will look for further bearish momentum towards the gap (rolling contract) in between February 16th’s 85.95 high print and the following session’s 87.35 low print. The closure of this gap will fulfill all of the bearish expectations we have expressed in our reports over the five weeks.
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.