Thursday Commodities & Currencies
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The big news since the last post on this topic is the decline in the dollar below important support, and the breakout of the Euro above resistance. The impact has rippled into the commodities.
In addition to the strength in the Euro, the Pound is poised to break out significantly to new highs above important resistance. This would be a major move for the British Pound. The Japanese Yen found support recently at a lower uptrend support line and is breaking above the 39-week moving average. This is significant considering the low rates in that country. The Yen could represent a significant long-term value if Japanese rates continue to slowly rise over the years ahead.
Commodities have clearly been stronger than the headline CRB and energy prices have revealed. Most commodities have remained in strong long-term uptrends. As mentioned by John Murphy in a recent article, the heavy energy component of the CRB index has weighed it down due the recent weak energy prices. But the more commodity-balanced older CRB index, now called CCI, has remained very strong and is now breaking to new highs.
Oil broke below a significant uptrend-line earlier this year, but found both shelf support and support at a longer-term uptrend-line that has continued to hold nicely. With the weakness in the US Dollar there has been a corresponding tick higher in Oil prices. Gasoline has a similar story to Oil in that it dropped significantly but held at shelf support, and now prices are starting to move higher.
The standout area of commodity weakness has been Copper which is considered the most important industrial metal because it is so significant for economic development. In fact, it is often used as a proxy to guage the level of economic strength. Copper recently broke below the 39-week moving average, but so far has held at shelf support. Because Copper prices moved so far and so fast over the past few years, it isn't too surprising that it is now consolidating at a high level. But if prices break below the current support, there are no other support levels close below and prices could move down by quite a bit.
