Bloomberg Access:{OIAR<GO>}

WTI crude oil:

May WTI  advanced 84 cents on April 10 on volume of 1,206,086 contracts. Total open interest increased only 3,567, a number that is dramatically below average. The May contract lost 67,536 of open interest, which means there was barely enough open interest increases in the forward months to offset the decline in May.

From April 4, through April 10, the May contract has gained $2.84 while astoundingly cumulative total open interest in this time frame declined by 19,677 contracts. This confirms that market participants view the current rally with a great deal of skepticism and are liquidating positions as the market advances.

In summary, the rally is being fueled by short covering, not net new buying. Additionally, the COT report confirms this and in the most recent report released on Friday, managed money liquidated 1,322 of their long positions and also liquidated 19,069 of their short positions. While we have no idea how far this rally can carry, at some point new buyers are going to have to step up to advance crude oil prices.

On April 5, OIA announced that May and June 2017 WTI crude oil generated short term buy signals and it will be interesting to see whether an intermediate term buy signal can be generated. For this to occur, the daily low must be above OIA’s key pivot point for April 11 of $53.13.

The moving average setup looks potentially bullish with the 50 day moving average for the May contract standing at 51.96, 100 day, 52.89 and the 200 day moving average coming in at 51.33. At this juncture, we have no recommendation.

Dollar index: On April 10, the June dollar index generated a short term buy signal, and remains on an intermediate term sell signal.

The June dollar index lost 16.5 points on volume of 22,140 contracts. Though volume was light, the total open interest increase was massive, up 1,056 contracts, which relative to volume is approximately 75% above average. As this report is being compiled on April 11, the June contract is experiencing its typical pullback after the generation of a buy signal, trading 30.6 points lower on the day. As we pointed out in previous reports, a strong dollar has negative implications for precious metals and will impact Federal Reserve decisions on interest rates.  No recommendation.

Euro: On April 11, the June euro generated an intermediate term sell signal after generating a short term sell signal on April 3.

The June euro advanced 6 pips on volume of 133,636 contracts. Total open interest increased by 2,832 contracts, which relative to volume is approximately 20% below average. As this report is being compiled on April 11, the June contract is trading 9 pips higher on the day and has made a daily high of 1.0664, which is the highest print since 1.0715 made on April 7. 

Ever since the euro generated a short term sell signal on April 3, it has been weak and yesterday and today are the first days of advances seen since the generation of the sell signal. The French elections are rapidly approaching and the euro will remain weak until then.

AUD/CAD: On April 10, AUD/CAD generated an intermediate term sell signal after generating a short term sell signal on April 7. We have no recommendation.