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The inverse relationship in the dollar and commodities was very evident this week, so keep it on your radar.

On the week, Crude appreciated just over 4% taking prices in the front month near $113/barrel. Very impressive move for the bulls, but perhaps more stunning was the ascent of the distillates, with RBOB up 3.5% and heating oil higher by nearly 6%. My question is: At what price we will see demand destruction? We would not rule out a 3-5% correction, so do not get too long in the tooth. Natural gas has finished lower for six sessions in a row, but the 11% plus correction should be used as a buying opportunity. We’re suggesting purchasing July 50 cent call spreads and on signs of an interim bottom we will be buying June futures for clients. The indices should finish flat on the week but stiff resistance appears to be forming, so longs should book profits and aggressive traders could institute shorts and add on a confirmation of a trade lower. Our favored play is June put options in the ES.

The U.S. dollar posted a fresh 2011 low today as all majors were higher; the euro and Swissie were the standouts. Clients hold shorts in the euro and Aussie and are currently underwater. We would remain in both for now and look to add if prices start to rollover. A new recommendation: Aggressive traders could scale into longs in the yen with tight stops.

We are neutral in lean hogs having lifted client’s shorts yesterday at a profit … stay tuned. As for live cattle, we will be looking for a buy level in June next week ideally closer to $1.15.

Relentless moves in gold and silver today, as I had to look twice, thinking my eyes were deceiving me. Silver picked up over 5% this week and gold appreciated just over 3%. We missed it and do not like either at these levels.

Aggressive traders could buy cocoa and sell cotton at their current levels. We have a target of July cocoa at 3300 and $1.75 in July cotton. We’re suggesting buying December corn on a correction, are okay buying November soybeans at current levels and have finally tuned the corner on the CBOT/KCBOT wheat spread.

As for the debt complex this week, it was not good for the bulls, though we still like buying weakness in 10-yr notes as we feel a bounce is coming … trade accordingly.

Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.

Source: Today in Commodities: Fighting Against the Dollar