Commitment of Traders
Overview of the near-term outlook for the major currencies.
As suggested here last week, the dollar moved higher over the past five sessions. Although it finished the week on a firm note, I suspect we may have a pullback before seeing higher levels. Here is why.
Overview of the price action in the fx market.
It may seem counter-intuitive but the US dollar appreciated last week, despite the partial closure of the Federal government, the heightened risk of default and the nomination of Yellen. The dollar can move higher next week too.
Technically, the dollar is looking a bit better. Here is our assessment.
Overview of near-term dollar outlook.
Even if one correctly predicts what the FOMC does next week, getting the direction right for dollar is a different matter. The markets are anticipatory in nature and the effect often takes place before the cause.
The Fed is among the only major central banks not meeting next week, yet it is overshadowing the others. The dollar's tone improved markedly in recent days. There is still scope for the Fed to disappoint the dollar bulls.
Next weeks events placed within the larger context.
Short-term, dollar risks still appear on the downside, but this appears largely corrective in nature. Medium-term, a higher dollar still appears to be the most likely scenario.
Last week we defined the golden sentiment rule as "anything that isn't off the chart soon will be." This will happen in a "perfectly sustainable" fashion, where increasingly more paper gold is shorted to record levels even as actual physical holdings held by official Comex vaults continues to drop. For one particular reason why the price of paper gold may be at 3 year lows, we will provide some formerly classified perspective shortly in a post. But in the meantime, and while we await the weekly CFTC commitment of traders report (delayed until Monday due to the July 4 holiday), we are happy to report that the JPM disconnect between the epic delivery requests and its reported gold holdings (for which the "Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness") reconnected modestly, and as per the latest Comex update, another 6.8k ounces of gold was pulled from JPM's 1 CMP world's biggest gold vault, dropping its total gold inventory to a fresh record low.
Brief discussion of the price action that is lifting the dollar at expense of nearly every other currency.
The S&P 500 ended the month with an odd shade of green (called red). This is the worst month in stocks for 8 months and makes only the 5th negative month in the 20 months since the global central bank co-ordinated save in Q4 2011. The week, however, saw the S&P gain around 1.25% on the back of endless repeated bullshit from various Fed heads about how we all got it so wrong... which also saw Treasury yields drop notably (30Y -8bps on the week and 10Y down 16bps from its Monday highs). Equities remain the big year-to-date winners and despite some of the biggest single-day gains in over a year today gold and silver remain at the lower end of the pile. The Nikkei and the S&P lead global DM equities (now what do they have in common?). Then with minutes to go, S&P futures collapsed on massive volume to the lows of the day...
Turd Ferguson, of the TF Metals Report, does superb work and commentary on the precious metals markets. His latest analysis on Friday’s Commitment of Traders Report caught my attention for a number of reasons, in addition to it being so well done.
Two days ago we suggested that "they better pray there is no short squeeze." Today, following the just released latest CFTC Commitment of Traders data which showed that the Comex gold short position grew once again to a new all time high of 79,416 shorts, all prayers are now off. If we may be so bold as to we suggest, the time has come to upgrade to the sacrificial slaughtering of at least a lamb on the altar of Saint Ben, because even the tiniest hint of a forced cover will now result in the biggest rip your face off levered short squeeze seen in the history of the yellow metal. Maybe throw in an ink cartridge or two for good measure...