CFTC data released Friday January 29th showed currency speculators reversed short positions on the US dollar of 3.12 billion to a net long positions of 3.11 in the week ending January 26th, according to Reuters News. Significant changes in last Friday's report include both an increase in longs and a decrease in shorts in the Yen, significantly lowering the net short position, an increase in shorts in the Euro, both a decrease in longs and an increase in shorts in the Pound Sterling, and decreases in net longs in the Canadian and Australian dollars, mostly in the Canadian, however.

Friday's 4th quarter GDP data showed the US economy grew at 5.7%, the best quarterly performance since 2003. This dollar finished the week at the strongest level since July 2009, gaining on the Euro by nearly 2% since January 22nd. The dollar also gained ground against Canadian, Australian, British, Swiss and Japanese currencies last week as stronger than expected economic data suggested the US is recovering from recession faster than other developed countries. According to Bloomberg, "Such data raises expectations the US Federal Reserve could hike interest rates before the European Central Bank. That encourages investors to move into dollar based assets that would benefit from higher US borrowing costs. Other factors likely contributing the recent strength in the USD include the sovereign debt issues of Greece and Portugal, and China's increase in bank reserve requirements.

The big report this week will be the US non-farm payrolls and unemployment data scheduled for Friday February 5th at 730am Central time. According to a Bloomberg survey of 50 economists, payrolls may have risen by 13,000 and unemployment may have held steady at 10% in January. It is unlikely that we will see any tightening by the Federal Reserve until we see several consecutive months of employment growth, and December's report showed a loss of 85,000. The US lost 7.2 million jobs since the recession began in 2007 so we have a long way to go on the road to recovery.

Technically, the US dollar has recovered nearly 1/3 of the value it lost since we the Fed began easing monetary policy aggressively in March of 2009, while the Euro has given up nearly 50% of its gains over the same period just since the beginning of December 2008. Expect the US Dollar to continue to gain on the Euro in the week ahead, (Note USD and EUR/USD charts below).

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Commitments of Traders (COT) Data as of January 26th, 2010
(For each commodity, the COT reports provide information on the size and the direction of the positions taken, across all maturities, by three categories of futures traders)

JAPANESE YEN (Contracts of 12,500,000 yen)

1/26/10 week 1/19/10 week

Long 28,821 23,718

Short 33,168 40,814

Net -4,347 -17,096

EURO (Contracts of 125,000 euros)

1/26/10 week 1/19/10 week

Long 33,106 34,186

Short 72,645 59,468

Net -39,539 -25,282

POUND STERLING (Contracts of 62,500 pounds sterling)

1/26/10 week 1/19/10 week

Long 15,075 21,199

Short 42,228 41,370

Net -27,153 -20,171

SWISS FRANC (Contracts of 125,000 Swiss francs)

1/26/10 week 1/19/10 week

Long 12,421 17,281

Short 6,716 3,310

Net 5,705 13,971

CANADIAN DOLLAR (Contracts of 100,000 Canadian dollars)

1/26/10 week 1/19/10 week

Long 35,659 58,048

Short 9,850 11,245

Net 25,809 46,803

AUSTRALIAN DOLLAR (Contracts of 100,000 Aussie dollars)

1/26/10 week 1/19/10 week

Long 61,097 77,331

Short 15,779 14,480

Net 45,318 62,851

(Source: Reuters News)