Is the Dollar Done?

I am not implying for good but quietly the dollar has lost ground for the last 6 sessions trading to its lowest level in one month today. The losing streak in Crude was broke today with conviction as a draw of 2.2 Million in today’s inventory report has prices in the futures $2 higher trading back near $86/barrel. After the recent shakeout prices may be on their way to $90/barrel. We will be out of the country next week so we chose not to be in Crude until we return but those wanting exposure we would advise longs. We would remain long as long as $84 holds on a closing basis in May.
Natural gas was higher for the second day running but we would like to see a more convincing confirmation like a settlement above $4.35 in May. We suggest longs in June futures and purchasing July 50 cent call spreads. Assuming we’ve found a low a 38.2% Fibonacci retracement would lift prices in May to $4.65. Positive earnings and comments from Bernanke helped lift indices to fresh highs. With the Dow above 11000, S&P above 1200 and the NASDAQ above 2000 what was resistance now becomes support. Regardless we are not buying with clients and would rather miss more upside than be long at these levels.
Sugar gained 3% today and had its first close above the 20 day MA since mid-February. We are advising longs and expect a trade above 19 cents in the not too distant future. We feel you still have time to layer in longs in OJ as prices have only moved a nickel off their lows last week. We’re expecting an appreciation of 12-15% in prices in the coming weeks. Treasuries failed to make new highs today and look destined to make new lows. The inverse relationship to equities should play out but we would prefer to be a seller from higher levels with clients. Corn gained 1.50% today trading to its highest level in 3 weeks. We continue to suggest clients to have long exposure via futures and options anticipating a trade back above $4/bushel in the front month contract.
June live cattle traded lower for the third consecutive day; continue to trail stops down protecting profits. The trend line where prices bounced from 2 1/2 weeks ago comes in at 92.70. The manic action continued in industrial and precious metals with prices higher in today’s sessions. Until June gold and May silver gets above Mondays highs we are operating under the assumption that prices are due for a setback. Those levels come in at $1170.70 in gold and $18.61 in silver. We are not advising shorts but would rather wait for a pullback to re-establish longs. If the dollar breaks 80.00 expect more upside in foreign currencies, if that level holds look for selling opportunities in the other crosses. We will be exploring short plays in the Pound, Swissie, Euro and Loonie on signs of dollar strength.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.


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