Hi Traders,

What an awesome weekend here in Tampa Bay… and that’s all I’ll say just in case it’s cold and nasty where you are. Okay, that and… Hold on, summer is coming!

Okay, the COT charts are here; feel free to grab a copy of the sheet music and sing along.

The commodity currencies AUD and CAD are starting to push the “extremes” limits, especially the latter. Remember, though, even when this occurs, it can take some time for the spot FX market to change gears; these readings are best used as a heads up. NZD, though a member of the commodity currency team, keeps getting sold by the specs and bought buy the commercials. And, it’s nowhere near extremes, so this could go on for a while. You might take a look at all three charts and note the difference.

The Swiss Franc and euro charts show the commercials 180-degrees apart; the commercials have been selling and the specs buying, though this may be changing soon, especially considering what’s going with the EU’s PIIGS. I mentioned this last week, so I won’t kick that dying horse–that said, I never understood why anyone would consider kicking a dying horse, anyway.

The pound is beyond extremes, having turned around a couple of weeks ago. The commercials are buying, though not with conviction, and the specs are selling, though not with any sort of conviction, either. GBPUSD bounced off a monthly pivot last Friday and made a nice move higher. Will it head to 1.6400? Absolutely… unless, of course, it doesn’t. GBPJPY and GBPCHF, like GBPUSD, found support (see daily price charts) and, by the looks of things, the market is considering where to take these pairs next. If the most recent daily highs are taken out, I anticipate this happen with less momentum, which is a signal for a turn (think “divergence)). Keep an eye on the daily highs.

The market is in a state of confusion about the yen. And, with the tsunami, it might take a little longer for conviction to enter the picture. Standby to standby.

The USD Dollar Index shows the commercials and specs180-degrees apart, which, when considering the swissy and euro charts, makes sense. Correlate these with the price charts and the extremely negative USD sentiment, and we’re seeing the makings of an about-face.

Gold and silver are an interesting couple. The small traders and specs are buying gold again, but with silver making these most recent highs, it appears they’re concerned and not sure what to do. That said, unless one’s an aggressive trader, shorting silver now would, in my opinion, take a lot of guts and the willingness to be wrong if the market continues higher. Remember the old adage, “The market is never too high to go higher, or too lower to go lower.” That, and, “Trade what you see.”

That’s it for this week.

Cheers,

Clay