With the rise in the US Dollar Index through the 78 level, we are watching the equal and opposite response in the physical commodities. For a few sessions it looked like this relationship would be broken, as grains rallied with the small bounce in the Dollar. However, today we have seen the spread return to a directly inverse relationship. The dollar rally sparked selling across the board in the grains and metals, and crude oil.
What is interesting is the break in the face of much larger than anticipated exports in corn and beans. Fundamentally, we should be a lot higher, based on this demand. Time will tell if the demand will overcome the influence of the Dollar Rally. At some point, the fundamentals, if bullish enough could cause a definite separation of the influence of the dollar rally.
If the world wants US grain, they will come for it, no matter the value of the dollar, which is still historically low.
Jan beans opened on its high at 1052 and proceeded to skate lower to the 1029 low of the day. We are currently sitting at 1033. Basically in the middle to lower half of the recent 50 cent trading range between 1020 and yesterday’s foray into the 1070 level on the charts. A little volatility? I’d say yes. Currently trading at 1033, we are almost 40 cents lower from yesterday’s highs. We don’t have good support on the down side until 1025 to 1021. The break out traders who bought the new highs yesterday are looking at 2000 losses for every contract of beans they bought and held.
March wheat is 10 cents lower at 527 with a high at 529 on the open and a low at 527A lower opening followed by a 2 cent trading range. That makes for difficult trade. We have support on the charts at 510.
March corn is 9 cents lower at 401 with a open at 404, a high for the day at 404 3/4 and a low at 401 1/4 which is the last print. We have support on the charts at 390.
The metals are a different story. They are directly a currency hedge vs. the dollar.
Strength in the dollar, causes the shorts to cover. So today, we see a halt to what had been a mini-rally in the metals. Today Gold is down over 40 bucks at 1101.60. On the charts, we have a band of support next down at the 1085 to 1070.
Silver is following suite, with Silver down over 50 cents with a low at 17.115. Two weeks ago, we were at 19.50,and we have now extended to new lows. The momentum traders who typically buy new highs have had their respective heads handed to them over the short term. The next good support in the silver is at 16.80 to 16.20 level, basically the October/November lows.
Crude Oil is selling off in sympathy with the dollar rally as well.
Today’s high at 7497 (basically 75) has given way to a low at 73.38. Support in the crude will be found at the 69 to 70 dollar band on the daily charts.
At this time of year, being holiday markets, the volatility is amplified due to lower volume and less player. These conditions result in the markets moving to their extremes on the daily charts, as the markets look for a break in the selling pressure. All in all, its a bad time to be doing a whole lot.
Good Trading
