Yesterday, we saw big moves for all Majors Currencies. Looking at yesterday’s post on USDCHF throwback in day chart; hourly chart expansion gains, there seems to be a correlation of the Dollar Index, commonly known as USDX, with all cross-pairs of the USD.
Let’s have a look at the COT Report posted last Friday, 15 Jan, to see if there is any signs that the big players have left trails.
It can be seen that there was a support for USDX at 74.12, and a Big falling wedge pattern formed since Mar 09 till now.
The breakout from the wedge following with the breakout to above 50 day moving average, suggest that a bullish trend reversal is intact, thus, USDX is likely to trend upwards.
From the COT Indicators, our interest is to look at the Net Position of the Commercial Traders and the Total Open Interest. Commercial Trader are the Big Boys and the Smart Money as discussed in my previous post and thus the Total Open Interest will also reflect largely on their open positions. We see that the Net Position of the Commercials were on the extreme short position seen at the previous week, and they were unwinding their shorts position slowly as from last week. It is the similar pattern last seen in 3rd quarter of 2008, and causing a bull rally on the USDX.
The USDX is an index of Major Currencies and therefore the chart pattern seen on USDX is similar with those pairs with USD as its base currency, eg. USD/CHF, USD/JPY and USD/CAD.
So which will move first? The USDX or the cross pairs in the spot market? I might find an answer to this when somebody can tell me which come first: ‘The chicken or the egg’?
At the end of day, we should be traders first, investor second, and ride on the trend as long as possible.
