Not surprisingly the Dollar is officially overbought from the COT report with the “combined” spec and fund Net Long position in the Dollar hitting a new record level at 84,696 contracts. However, the US economic news flow of late has confirmed the US macro-economic differential edge, which in turn bolsters the US interest rate differential edge. With the Dollar showing corrective action from last Thursday’s peak and into the initial lows this morning, some of the technically overbought condition was balanced. A minimal gain in OECD leading indicators this morning is being spun into evidence of further slowing in the Euro zone. However, the US economic report slate is a little thin early this week and that could slow the anticipated recovery in the Dollar somewhat. Critical support in the Dollar comes in at 92.20 and there might be little in the way of resistance until the 92.76 highs.
The Commitments of Traders Futures and Options report as of January 6th for US Dollar showed Non-Commercial traders were net long 69,216 contracts, an increase of 20,874 contracts. The Commercial traders were net short 84,696 contracts, an increase of 21,681 contracts. The Non-reportable traders were net long 15,480 contracts, an increase of 806 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 84,696 contracts. This represents an increase of 21,680 contracts in the net long position held by these traders.
Technical Outlook: The daily stochastics gave a bearish indicator with a crossover down. Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market’s close below the 1st swing support number suggests a moderately negative setup for today. The next downside objective is 91.67. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 92.51 and 92.94, while 1st support hits today at 91.87 and below there at 91.67.