WTI crude oil:
June WTI crude oil lost 65 cents on volume of 1,415,998 contracts. Volume was the highest since April 19 when the June contract lost $2.00 on volume of 1,504,973 contracts and total open interest increased by 6,342, a number substantially below average, and a bearish open interest statistic.
On April 27, total open interest increased by 7,262 contracts, which relative to volume is approximately 75% below average. However, a total open interest increase on yesterday’s decline confirms that new short-sellers were entering the market, although at a rate substantially below average. The June contract accounted for a loss of 10,465 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in June and increase total open interest.
On April 24, June WTI generated a short term sell signal and had already been on an intermediate term sell signal. However, ever since the sell signal, the June contract has been moving in a sideways to lower pattern, not a sharp move lower. On April 24, the June contract made a low of $49.03 and the lowest price since then has been 48.20 made on April 27. In previous reports, we have commented on the minor increases and decreases of open interest for the past several days and continue to think this underscores reluctance on the part of would be market participants to make strong commitments one way or the other. We recommend a stand aside posture.
July Chicago corn advanced 2.50 cents on volume of 483,400 contracts. Volume was the lowest since April 24 when the July contract gained 1.75 cents on volume of 479,056 contracts and total open interest declined by 487.
On April 27, total open interest declined by a massive 54,552 contracts, which relative to volume is approximately 320% above average and the reason for this was the large decline of open interest in the May contract of 60,685. As this report is being compiled on April 28, the July contract is trading 4.00 cents lower on the day on fairly light volume thus far in the session. The July contract has made a low of 3.63 1/2, which is the lowest print since 3.62 1/2 made on April 25.
We continue to think the 3.60 area will hold basis July and that a short term buy signal will be generated in the not-too-distant future. For this to occur the low of the day must be above OIA’s key pivot point for April 28 of 3.73 1/4. We think the odds of July breaking below 3.60 increase if the July contract makes a daily high below OIA’s pivot of 3.67 1/8. Stand aside.
British pound: On March 22, OIA announced that the June British pound generated short and intermediate term buy signals.
The June British pound advanced 62 pips on volume of 112,812 contracts. Total open interest declined by 644 contracts, which relative to volume is approximately 75% below average. Yesterday on April 27, the June contract made a high of 1.2935, which took out the previous high for the move of 1.2929 made on April 18.
As this report is being compiled on April 28, the June contract is trading higher again, up 46 pips or +0.36% and has made a new high for the move of 1.2975, the highest print on the weekly continuation chart since 1.3003 made during the week of September 26, 2016. Yesterday, the June contract closed at 1.2924, which is the highest close since 1.2997 made on September 30, 2016.
This afternoon, the COT report will be released and it will give us a better idea of the extent to which managed money has trimmed (or not) their net short position. It is likely the net short position the pound will reverse and once it does, the move higher in the pound will be on borrowed time. However, this may be a couple of weeks away.
The 50 day moving average for the June contract of 1.2507 is substantially below the 200 day moving average of 1.2688, though it is above the 100 day moving average of 1.2495. Once the 50 day moving average gets close to the 200 day, this may be another indication the pound has reached its point of equilibrium, which we suspect will dovetail with leverage funds becoming net long. At this juncture, the pound may begin to roll over again. We advise against buying or shorting the pound.
Mexican Peso: On April 27, the June Mexican peso generated a short term sell signal, but remains on an intermediate term buy signal.
The June Mexican peso advanced 50 pips on volume of 59,795 contracts. Volume fell substantially from April 26 when the June contract lost 89 pips on volume of 76,780 contracts and total open interest declined by 192. On April 27, total open interest increased by 454 contracts, which relative to volume is approximately 55% below average, but the total open interest indicated that buyers were willing to step up and make commitments as the June contract made a high of .05248.
As this report is being compiled on April 28, the June peso is experiencing a typical counter trend rally after the generation of a short term sell signal. Currently, it is trading 50 pips higher on the day and has made a high of .05263 on low volume. With only a couple of hours left in trading the June contract currently registers volume of 34,342 and in yesterday’s trading the June contract traded 59,676.
In summary, volume is drying up on the rally, this tells us there is not much left on the upside before the peso resumes its downtrend. Just two days ago on April 26, the June contract made a low of .05137 and from that low thru today’s high has rallied approximately 130 pips.
A continuation of the rally on Sunday evening/early Monday is possible, but the June contract is getting to a number of key points of resistance. The first is the 20 day moving average of .05274, then OIA’s pivot points of .05281 and .05297. Because of the erratic U.S. president, some comment made by him or his advisers could send the peso sharply higher or lower. Clients should keep this in mind when entering new positions and exits should be place.
From the April 26 note on the Mexican Peso:
“The catalyst for yesterday’s move was Trump’s stupid idea of eliminating or trying to renegotiate Nafta, which apparently has been walked back on April 27. As a result, the peso is trading 40 pips higher on the day. Wait for another day or two of rally action before initiating bearish positions.”
AUD/CAD: AUD/CAD will generate short and intermediate term buy signals on April 28.