Dollar Index: On March 16, the June dollar index generated short and intermediate term sell signals.
The June dollar index lost 39 points on volume of 36,826 contracts. Total open interest declined by 929 contracts, which relative to volume is average. Yesterday’s action was in contrast to that of March 15 when the June contract lost 99.9 points on volume of 48,089 contracts and total open interest increased by 943.
As we pointed out in yesterday’s report, with managed money heavily long the dollar index there is more damage to be done on the downside. Today, the CFTC will release its COT report and this will give us a better idea of the extent to which leverage funds remain long. As this report is being compiled on March 17. the dollar index is trading nearly unchanged on the day. Stand aside.
Euro: On March 16, the June euro generated an intermediate term buy signal after generating a short term buy signal on March 13.
The June euro advanced 44 pips on volume of 216,130 contracts. Total open interest increased by 5,276 contracts, which relative to volume is average. However, yesterday’s total open interest increase as the euro moved to a new high for the move of 1.0819 indicates that new buyers were flooding into the market.
Recently, we have seen positive open interest action on price advances and declines. On March 10 when the euro advanced 99 pips on huge volume of 514,367 contracts total open interest increased by an astounding 32,560. In our March 10 research note (see below), we warned potential short sellers about the very positive action in the euro. We anticipated higher prices and a new short term buy signal.
As this report is being compiled on March 17, the euro is trading nearly unchanged on the day, but has made a new high for the move of 1.0831, which is the highest print since 1.0847 made on February 6. The moving average setup continues to be bearish with the 50 day moving average of 1.0709 below the 100 day moving average of 1.0759.
The 200 day moving average stands at 1.1032 and we anticipate a move up to this level at which time the market will likely stall. Keep in mind the French election is on April 23, approximately five weeks away. We think it is likely the euro will begin to head lower as the French election approaches, especially if the polls show that Le Pen is likely to be the victor. Stand aside.
From the March 10 research note on the euro:
“There is substantial support for the euro around the 1.0500 level during 2017. For example, the low on January 11 was 1.0480, and the low on February 22 was 1.0501 and on March 2 the low was 1.0498. The most recent low occurred on March 3 at 1.0505. This support combined with the short term buy signal that we anticipate in today’s trading indicates that the euro may have seen the lows for now and that higher prices that are ahead. There is still a couple of hours left in trading and currently the June contract is trading 35 pips lower at 1.0706, approximately 23 pips above the key pivot point for the generation of a buy signal.”
Australian dollar: On March 16, the June Australian dollar generated a short term buy signal and remains on an intermediate term by signal.
The June Australian dollar lost 20 pips on volume of 107,061 contracts. Total open interest increased just 666 contracts, which relative to volume is approximately 60% below average. As this report is being compiled on March 17, the Australian dollar is trading 38 pips above yesterday’s close, but has not taken out yesterday’s high of 77.06, which is the highest print since 77.21 made on February 23. Stand aside.
The June yen will generate a short term buy signal provided the daily low is above OIA’s key pivot point for March 17 of .8873. The low on Friday is .8846 On March 3, the June yen generated a short term sell signal and was never able to generate an intermediate term sell signal. Therefore, once the short term buy signal occurs, which we think will occur on Monday, the yen will the on short and intermediate term buy signals. Do not short this market.
The June British pound will generate a short term buy signal provided the daily low is above OIA’s he pivot point for March 17 of 1.2403. The low on Friday is 1.2353 Like the yen, do not short the pound. Leveraged funds are heavily short both contracts.
April gold advanced $26.40 on heavy volume of 282,822 contracts. Surprisingly, total open interest declined by 5,130 contracts, which relative to volume is approximately 25% below average. The total open interest decline on yesterday strong advance indicates that market participants were liquidating as the market moved higher.
The strong move was caused by the announcement of the Federal Reserve, which sunk dollar index and this usually pumps up the price of precious metals. April gold remains on short and intermediate term sell signals. For a short term buy signal to occur, the low of the day must be above OIA’s key pivot point for March 16 of $1235.80. Stand aside.