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WTI crude oil:

May WTI crude oil advanced $1.66 on volume of 1,163,315 contracts. Total open interest increased by 8,344 contracts, which relative to volume is approximately 60% below average, but a total open interest increase on yesterday’s price advance is positive. The April contract accounted for loss of 27,100, which means there were sufficient open interest increases in the forward months to offset the decline in April and increase total open interest.

As this report is being compiled on March 18, the May contract is trading 17 cents lower and has made a daily low of 41.28, which is substantially above yesterday’s print of 40.00. The May contract has made another new high for the move of 42.49, which is the highest print since 42.98 made on December 9, 2015. On March 3, OIA announced that May WTI crude oil generated a short-term buy signal and an intermediate term buy signal on March 10. We have no recommendation.

Natural gas:

April natural gas advanced 6.8 cents on substantial volume of 436,074 contracts. Total open interest increased by 2,379 contracts, which relative to volume is approximately 70% below average, but an open interest increase on yesterday’s advance is positive. The April contract lost 15,489 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in April and increase total open interest.

As this report is being compiled on March 18, the May contract is trading 2.1 cents lower on the day. We are looking for a spot to recommend bullish positions, but want to see a few more days of trading activity. As we pointed out in yesterday’s report, managed money is heavily short natural gas, and on a seasonal basis, natural gas is strong from March through May. The bearish story is well known and the market has discounted it. On March 16, OIA announced that April and May natural gas generated short-term buy signals, but both contracts remain on intermediate term sell signals. We have no recommendation at this juncture.

Silver:

May silver advanced by a very strong 81.4 cents on heavy volume of 86,139 contracts. Volume was the strongest since March 4 when silver advanced 54.8 cents on volume of 91,090 contracts and total open interest increased by 4,854 contracts. On March 17, total open interest increased by a massive 8,985 contracts, which relative to volume is approximately 300% above average. Yesterday, the May contract made a new high for the move of $16.075 and this has been taken out on March 18 with another new high of 16.17, which is the highest print since 16.37 made on October 28, 2015.

Silver has been the laggard for quite some time and it appears this phase is coming to a close. On March 18, the May contract is trading 21.8 cents lower, or -1.36% versus gold trading $11.80 lower or -0.93%. Silver remains on short and intermediate term buy signals. We have no recommendation except to say that new bullish positions should not be entered at current levels. 

Dollar index:

The June dollar index lost 1.124 points on heavier than normal volume of 31,018 contracts. Total open interest exploded higher by 1,564 contracts, which relative to volume is approximately 100% above average meaning aggressive new short-sellers were entering the market in large numbers and driving prices to a multi-month low of 94.675. As this report is being compiled on March 18, the June contract is having a rally for a change up 25.4 points, but has made another new low of 94.605. The June contract remains on short and intermediate term sell signals. We have no recommendation.

Euro:

The June euro advanced by a strong 1.23 cents on volume of 255,779 contracts. Total open interest increased by 3,240 contracts, which relative to volume is approximately 40% below average, but an open interest increase on yesterday’s advance is positive. Yesterday, the June contract made a high of 1.1371, which is the highest print since 1.1385 made on February 11. and this has not been taken out on March 18. On March 11, the June euro generated an intermediate term buy signal and a short-term buy signal on March 15. We have no recommendation.

Yen:

The June yen advanced by a strong 104 pips on volume of 210,361 contracts. Total open interest increased by a massive 7,051 contracts, which relative to volume is approximately 20% above average meaning aggressive new buyers were entering the market and driving prices to a new contract high of .9056, which is the highest print since .9017 made on February 11.

As this report is being compiled on March 18, the yen is trading near unchanged on the day and has not taken out yesterday’s print. In the research note published on March 13, we indicated the dollar would likely gain on the yen and we were completely wrong about this. The dovish comments by the Federal Reserve sealed the fate on dollar strength. It appears that further gains are ahead. The June yen remains on short and intermediate term buy signals.

British pound:

The June British pound advanced by a very strong 2.55 cents on substantial volume of 135,931 contracts. Total open interest declined by 1,247 contracts, which relative to volume is approximately 55% below average, but a total open interest decline on yesterday’s huge price advance confirms the negative set up for the pound. On March 15, the pound lost 1.41 cents on volume of 73,356 and total open interest increased by 2713 contracts, which indicates that new short-sellers were entering the market.

As this report is being compiled on March 18, the June pound is trading in a firm manner up 13 pips and has made a new high for the move of 1.4519, which is the highest print since 1.4535 made on February 16. On March 14, the June pound generated a short-term buy signal, but remains on an intermediate term sell signal.

The COT report will be released this afternoon and this will give us an idea of the extent to which leverage funds have liquidated short positions. Ideally, we want to see the majority of these players get blown out because they are increasing buying pressure to the pound as it continues to firm.

Once short sellers are removed from the equation, the pound will need new buyers to move it higher, and this buying interest will dissipate once prices have reached a high enough level. Ultimately though, we think the pound is headed lower and that the Brexit story will begin to reassert itself as a major factor in the pound’s direction. Stand aside.

Australian dollar:

The June Australian dollar advanced by a strong 1.22 cents on heavy volume of 119,842 contracts. Total open interest declined by 795 contracts, which relative to volume is approximately 65% below average, but the open interest decline confirms that short sellers were powering the market higher, not new buying.

Although leverage funds reverted to a net long position in the COT report of the prior week, there are short-sellers remaining in the market, and no doubt there participants trying to pick a top in the Australian dollar, which is hazardous to one’s financial health.

As this report is being compiled on March 18, the Australian dollar is trading 51 pips lower after making another new high of 76.51, which is the highest print since the week of June 29, 2015 when it made a weekly high of 77.08. The June Australian dollar remains on short and intermediate term buy signals. We have no recommendation.

Canadian dollar:

The June Canadian dollar advanced 96 pips on volume of 78,005 contracts. Total open interest increased by 775 contracts, which relative to volume is approximately 50% below average, but an open interest increase on yesterday’s price advance is positive.

Yesterday, the June contract made a new high of 77.26 and this has been taken out on March 18 with another new high of 77.38, which is the highest print since the week of October 19, 2015 when the Loonie made a weekly high of 77.47. As of last week’s COT report, leverage funds were still massively short the Canadian dollar by nearly a 4 to 1 ratio.

This probably has been pared down and the results will be published this afternoon. As this report is being compiled on March 18, the June contract is trading 18 pips lower on the day. The June Canadian dollar remains on short and intermediate term buy signals.We have no recommendation.