Intraday Market Thoughts

Dollar Falls but Speculators Trim Shorts, CHF at Record Highs

by Adam Button
May 28, 2011 1:05

USD lagged for the second day but Fridays CFTC speculative data showed USD positioning shifting to the least bearish since January. Optimistic comments from the G8 helped sentiment and the Treasury opted not to label China as a currency manipulator. USDX closed the week back below its 55 dma.

The Swiss franc was the runaway best performer followed by the euro on Friday. For the week, CHF was the winner followed by NZD. The franc closed at record highs versus EUR and USD while NZD/USD hit 0.8198 a three-year high and just shy of the all-time record of 82.14. The kiwi was boosted by talk of Chinese investment in New Zealand bonds. The Canadian dollar was the worst weekly performer and was lower for the fourth consecutive week. EUR/USD closed at 1.4319, which is one pip below the 55 dma.

Fridays CFTC data showed the net short position in USD falling to $18.8 billion, the smallest since Jan. Net euro longs were scaled back to +19.1K from 41.6K. Three weeks ago positioning stood at +99K so its safe to say that position squaring has had a large downward impact on EUR in May and longs are now much less vulnerable. The dollar remains net short against every major except GBP which moved to -14.1K from -0.9K. By the same token, longs in CAD, JPY and CHF were scaled back while AUD and NZD longs increased. In the metals market, the speculative froth has been mostly chased out of silver with net longs hitting the lowest since May 2009. The data measures up to the close on Tuesday.

The S&P 500 gained 0.4% on Friday while gold and copper hit three week highs. G8 leaders helped sentiment as they said the global economy is strengthening, Obama promised deficit reduction and Europe pledged determination to fight fiscal problems. Fridays gains did not prevent the fourth consecutive weekly decline in stocks.

The US Treasury delivered its semi-annual report on currencies and did not name China a currency manipulator but warned it has made insufficient progress in yuan revaluation.

The U of Michigan consumer sentiment index was revised to 74.3 from 72.4, no change was expected. The measure of inflation expectations fell to 4.1% from 4.4%, which should give the Fed the comfort it needs to stay on the sidelines. US personal income growth was in-line at 0.4% while spending was a shade soft at +0.4% compared to the +0.5% expected.

Check out our six monthly technical charts on EURUSD, USDX, gold, silver, SPX-500 & Dow 30, their respective stochastics & RSIs and latest INTERMARKET TRADES w/ entry, stops & limits:


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