February 3 – The U.S. dollar index collapsed this morning, dropping thus far to a low of 97.420, down more than 1,400 points and trading to its lowest level since it posted a low of 97.190 on December 15. A violation of that day’s low would leave the greenback vulnerable to a much more substantial sell-off. A surge in the yen as money flowed out of Japan’s stocks helped trigger a sell-off in the dollar, which saw its losses accelerate as it broke through areas of chart support.
There was a great deal of ownership in the dollar that suddenly feels uncomfortable with today’s weakness. Waning expectations that the Fed will be able to boost interest rates any time soon leaves holders of long dollar positions nervous. The dollar would appear to have strong fundamentals longer-term versus other major currencies, but such is not the story today.
Weakness in the dollar provides modest strength for the broader commodity sector today, led once again by crude oil. Once again, crude oil rallied this morning following a bearish inventory report that showed that stocks rose by another 7.8 million to a new record high 502.7 million barrels in the week ending January 29. Stronger crude and palm oil production concerns provide support for soyoil, but corn and soybeans have otherwise struggled to participate in today’s rally after failing to hold a breakout on Tuesday. Wheat prices are again trying to rally, although they’ve had trouble holding rallies in recent days. Livestock futures are higher on solid demand as producers in the central Plains and northwestern Midwest dig their way out from this week’s snowstorm. Cash cattle prices are expected to be steady to firm. Pork product prices are weaker and beef is mixed.
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