USD, SF, EC, JY

The dollar certainly appears to have reversed, at least for the next few days, against the Euro. The Yen and SF are still in bull markets against the dollar, but that may change soon.

Today's 30yr bond auction and PPI are suggestive of rising interest rates. Yesterday's 10yr bond was not. Tomorrow is the CPI. If the intermediate term future replays the intermediate term past, rising interest rates, if they appear, will push the stock market down and the dollar up. In the short run, the Fed will not act. That may lead to speculative moves in currency that resemble the course of a kite in brisk winds: zoom up, dive quickly, bat sideways, then repeat in whatever order happens.

Today's Nonsensical Numbers

Today's inflation numbers are in. Inflation is charging along at either a 6.6% per year or a 2.1% per year rate. What's the difference? If you don't eat or drive a car, heat your house or otherwise use food and energy, why we are only looking at 2.1%. The theory is that food and energy are "too volatile" to use in the "core" inflation rates, and that those numbers will tend to the core rate over time. Unfortunately, the amount of history available for such statistical analysis is only about 100 years or 1200 months. To reliably decide that not using food and energy is a reliable method would require something closer to 10,000 years of data. In other words, the government is treating us like mushrooms: keeping us in the dark and feeding us on manure.

Stocks Down, Dollars Up

Short Euros was the best trade, or best pair of trades. Short Ozzies also had a pair of shorts, and there were trades each way in Yen.

Crude Oil - Commitment of Traders Update

The hedge funds have reduced their fraction of long positions from 30% of the longs to 23%. The big speculators dropped 3% from 11% to 8% of the longs but remained 11% of the shorts. Commercial banks, acting on their own account, it appears, have become the largest speculative holder of crude oil, holding some 313,000 contracts not balanced by shorts. Refiners are holding some 392,000 contracts.

In summary, refiners are long 26%, banks are long 44%, funds are long 23% and large specs are long 8%. That is, of course, 1% too many, but the difference is due to rounding.

It isn't really news,but... Obama can reduce the price of crude oil simply by instructing the CFTC to remove banks (ridiculous) status as hedgers. Were he to do that tomorrow, with a 30 day window for the banks to disgorge the contracts they hold, prices would drop at least $20 per barrel.

Silver's Increased Margin

The chart below shows gold (upper) and silver (lower). In each case, days were the range was $2,000 per contract or more have a lavender background. Gold has had several, off and on for some time. But silver...

The Australian & Canadian dollar, the GBP traded against the USD

No, this is not an economics piece on the Star Wars Empire; I have in mind former British Empire currencies. Those are the Ozzie, the Loonie and the Pound Sterling, aka Australian Dollar, Canadian Dollar and British Pound, all as the traded against the USD.

$Aus/$US

First, the Ozzie which has been in rather a straight line rise since mid-March. Thursday and Friday saw sharp selling of the Ozzie, which has been rather over-bought. If you are a position trader and are still long the Ozzie, I trust you have exit orders in place; if not, I suggest you put some in.

The upcoming week should tell us a lot about where the Ozzie is headed. $1.10 is a very high price. It does not, to me, make economic sense. But we are not here to trade economics, but to trade currencies. The choices the market can make are, in descending order of probability: down for days, weeks or months; sideways for weeks; return to rising. I will return to this chart next weekend by which time one might hope for some clarity.

USD/CAD

The Loonie chart needs to be inverted to be like the Ozzie. By that I mean that the Ozzie is the price of one $A in $US while the Loonie is the price of one $US in $C. The net effect has been the same: the dollar has been getting creamed.

This chart looks to me like the USD is more nearly ready for an upward move than is the case for the Ozzie. Again, we should know more this time next week.

Finally, that preserve of the Old Lady of Threadneedle Street, the British Pound. The Pound has been beset by its own problems, including a change of governments in England, bringing a sea-change in fiscal policy. While the Pound has gained 10% or so against the $US, it has not been nearly so pretty nor so quick as the Ozzie has managed. FWIW, the Ozzie picked up about 12% or so over the time the Pound picked up 10%.

GBP/$US

I don't have any trading thoughts about the Pound. Just now, I'm not interested in trading it. In the near past, it hasn't been creating situations that I feel I know how to trade. That brings me to my favorite piece of good advice: When In Doubt, Stay Out!