MysteryTrader's Commentaries
It seems to be all about the dollar
As the value of the U.S. dollar has bounced off support at a previous low, prices of a number of commodities have tumbled, reinforcing the value of including intermarket analysis in any analytical approach. At least we assume the reversal -- or at least a pause -- in the dollar downtrend has been a big contributor to price weakness elsewhere. Apparently the acknowledgment by the BRIC countries (Brazil, Russia, India and China) at their recent meeting that the dollar will remain the world's reserve currency is giving the dollar a renewed boost. For the dollar's effect, look at coffee futures. It used to be a given that you didn't want to be short coffee going into the Brazilian winter in June-July, just as you didn't want to short orange juice futures going into the U.S. freeze season in December-January. But coffee has skidded from about $1.43 a pound to below $1.20 in June, a 14% decline. While markets such as sugar, crude oil and soybeans have maintained higher price levels, bears have taken a big bite out of corn, wheat, cocoa, cotton, orange juice and metals. No inflation signs in these markets. Bottom line: In any analysis of markets, keep the value of the U.S. dollar in mind.
Tags: economic-events
