It is Tuesday which only means that whatever oil trading takes place today will be easily overwhelmed by whatever interpretation about inventory levels released tomorrow dominates. However, the last week has been interesting in the respect of a shift in the behavior of the futures curve for WTI. Up until then, almost all volatility was concentrated in the front months, mostly 2015 maturities. The back end of the curve, the outer years, had seemingly settled into a relatively narrow range.

That has clearly changed as trading across the entire curve has shifted lower by more than a few dollars – front to back. In addition, contango out to 2017 is the lowest it has been in about a month. In other words, at least for now, it appears that whatever was troubling oil (not supply) just may be back.

ABOOK March 2015 Crude Oil Curve

So far, this latest “pause” in the larger bearish corruption has held in US credit as well as other commodities, so oil may be trading all its own idiosyncrasies or it may presage a shift in funding capacity and perceptions (like it or not, oil trading is highly leveraged and susceptible to funding realities). Copper, for example, may have retraced as much as it is going to as there doesn’t seem to be much appetite for sustained higher prices. Instead, like credit, there is a meandering here that may be closing the ebb.

ABOOK March 2015 Dollar Copper

Of course, the commonality in all of this is the “dollar” which continues on with its “tightening” disruptions. Until the “dollar” radically alters its behavior I will remain convinced that any changes in trends or short-term trading are simply pauses or ebbs in that otherwise sinking funding reality. To this point, the “dollar” continues to “rise” which is signifying continued pressure awaiting eventual breakout in discrete incidences.

ABOOK March 2015 Dollar

Like oil, we have seen a couple of changes in “dollar” proxies that are potentially consistent with another growing and widening outbreak of disorder. If Switzerland was the epicenter of the liquidity problem that culminated around January 15, the franc is again at the forefront of this latest (potential) return. In the past week, the franc has surged almost to parity with the “dollar”, which is not a favorable result for Swiss banks.

ABOOK March 2015 Dollar CHFUSD

NOTE: once again, this “dollar” problem is hidden when examining the franc from the perspective of the euro.

ABOOK March 2015 Dollar CHFEUR

That would mean that the removal of the peg to the euro only bought the shortest of reprieves, a heartbreaking outcome if it continues further in this direction. This distress of the franc portion of the “dollar” may be again rippling into even euro funding markets, as Eonia likewise suggests a move away from broad interbank risk positioning; Eonia has dropped to around its most negative fixes from the middle of January when the Swiss National Bank was last “forced” to act.

ABOOK March 2015 Dollar Eonia

Even the Danish krone has been trading back toward illiquidity levels despite repeated assurances from the Danmarks Nationalbank that it would unleash monetary hell to save its version of the euro peg. That would seem to suggest not just Swiss problems, not just euro problems, but multi-system liquidity heading backward toward January levels again.

ABOOK March 2015 Dollar DKKEUR

But it wasn’t just Europe that has seen “dollar” problems reignite, as Brazil’s currency plunged well below 3.00 in a debasement pace that has, again, quickened dramatically in the last week.

ABOOK March 2015 Dollar BRLUSDABOOK March 2015 Dollar Gold Real

With the mostly tight relationship with gold, as a proxy for “dollar” collateral liquidity, it is not surprising that gold has fallen again in parallel fashion to the real. Apart from the divergence in December and the first half of January (owing to safety bids, I believe, on the Swiss end of all this), gold and Brazil’s currency have been mirroring each other in at least rough correlations.

While these are disparate indications spread across all sorts of markets and geographies, the one commonality between them is the “dollar.” If we are to attempt any kind of more realtime indication of what eurodollar function looks like, it probably doesn’t get much more clear than this as all these market rates and prices are suggesting the same thing at the same time – look out for another “dollar” episode potentially just getting underway.

It may or may not be coincidence that US stocks are falling quickly also in the past week, which, if more like the October 15 even than January 15, might suggest another larger and more direct (from the US perspective) brand of dysfunction. Though the UST 10-year sold off last Friday (illiquidity played a role there), the bond is already back down to 2.13%, a 12 bps drop in just the past two days. In other words, all the players are once more in place.