Bloomberg Access:{OIAR<GO>}

WTI crude oil:

April WTI crude oil advanced 72 cents on light volume of 749,906 contracts. Surprisingly, total open interest increased only 881 contracts, which relative to volume is dramatically below average and in essence is an unchanged number. The April contract lost 7,487 of open interest, which means there was barely enough open interest increases in the forward months to offset the decline in April. Friday’s action was a disappointment to anyone bullish crude oil.

The COT report released on Friday revealed that managed money liquidated 19,678 of their long positions and added 17,048 to their short positions. Commercial interests added 7,660 to their long positions and liquidated 4,110 of their short positions. As of February 28, managed money was long crude oil by a ratio of 7.09:1, down sharply from the previous week of 10.31:1 (which was the high ratio for 2017) and below that of 8.82:1, the ratio of two weeks ago.

Although crude oil has not been able to make a daily low above our pivot point, which would signify that the rally has resumed, by the same token, it has been unable to generate a short term sell signal. The 20 day moving average of 53.64 is below the 50 day of 53.99, but the 50 day moving average is trading above the 100 and 200 day moving averages, meaning that it is in a bullish set up longer-term. For the April contract generate short term sell signal the high of the day must be below OIA’s key pivot point for March 6 of $53.22 and the high thus far on Monday has been 53.56. Stand aside.

Euro:

The March euro advanced 97 pips on heavy volume of 318,769 contracts. Total open interest though declined by 857 contracts, a number that is substantially below average, however, a total open interest decline on Friday strong advance confirms that short covering was the driver of higher prices.

The COT report released on Friday revealed that leverage funds added 5,744 to their long positions and liquidated 5,999 of their short positions. As of February 28, leverage funds were short the euro by a ratio 2.94:1, down from the previous week of 3.49:1 and the ratio two weeks ago of 3.12:1.

As this report is being compiled on March 6, the March contract is trading 20 pips lower and has slightly taken out Friday’s high of 1.0628 with another new high of 1.0642. On February 13, OIA announced that the March and June euro generated short term sell signals and currently remain on intermediate term sell signals. We think the path of the euro is lower, although this will be punctuated by sharp rallies. We have no recommendation.

Yen: On March 3, the March and June yen generated short term sell signals, but remain on intermediate term buy signals.

The March yen advanced 30 pips on volume of 186,509 contracts. Total open interest declined just 218 contracts. As this report is being compiled on March 6 the March contract is trading nearly unchanged on the day on low volume. The COT report released on Friday revealed that leverage funds added 2,688 to their long positions and liquidated 2,069 of their short positions. As of February 28, leverage funds were short the yen by ratio of 1.79:1, down from the previous week of 2.05:1 and substantially below the ratio two weeks ago of 2.39:1. We have no recommendation.

Australian dollar: On March 3, the March and June Australian dollar generated short term sell signals, but remain on intermediate term buy signals.

The March Australian dollar advanced 17 pips on volume of 136,113 contracts. Total open interest declined by 587 contracts, which relative to volume is approximately 80% below average. As this report is being compiled on March 6, the Australian dollar is trading 9 pips lower on the day. The COT report released on Friday revealed that leverage funds added 3,992 to their long positions and liquidated 3,722 of their short positions.

As of February 28, leverage funds were heavily long the Australian dollar by ratio of 3.63:1, up from the previous week of 2.90:1 and the ratio two weeks ago of 2.87:1. In summary, there are substantial numbers of speculative longs in the market that will add selling pressure as the Australian dollar continues to decline. This may provide a terrific opportunity on the short side, but only after the Australian dollar has had a counter trend rally, which could last from 1-3 days before turning lower.

Mexican peso:

The March Mexican peso advanced by very strong 118 pips on very heavy volume of 75,165 contracts. Though the move was strong on heavy volume, total open interest was negative and declined by 1,448, which relative to volume is approximately 20% below average and confirms that short-sellers were powering the market higher, not new buying.

The COT report released on Friday revealed that leverage funds continued to reduce their net short positions. As of the latest report, leverage funds added 6,518 to their long positions and liquidated 8,138 of their short positions. As of February 28, leverage funds were short the peso by a ratio of 1.68:1, down sharply from the previous week of  2.31:1 and substantially lower than the ratio two weeks ago of 2.87:1. At one point, several weeks ago leverage funds were short the peso by over 4 to 1.

On January 30, OIA announced that the March and June peso generated short term sell buy signals and intermediate term buy signals on February 9. Additionally, on January 30 we recommended the initiation of bullish positions and a week ago recommended that these be liquidated. The Mexican peso is being buffeted by political currents, which means that it can rally sharply on one day and be down sharply the next. We continue to recommend a stand aside posture, although the bias continues to be higher.