Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
Commodities rebound as USD eases
00:00, 03 June 2013
There are two main factors that drive the prices of commodities. First is the underlying supply and demand for the commodity itself. Second is the value of the US Dollar. Because commodities are hard assets priced in USD, all else being equal on a given day, if USD strengthens, the prices of hard assets tends to fall as less greenbacks are needed to purchase a given amount of a commodity. While this effect is usually seen in gold trading, it also can impact other hard assets like energy and metals. Crude oil, gasoline, copper and grains have all been rallying to start the new month, boosted by a combination of both factors. Although Chinese PMI numbers sent mixed signals, positive surprises out of Europe, particularly for Spain and the UK have helped to improve sentiment toward future resource demand. Meanwhile, USD has resumed its correction this morning. Last month’s massive USD rally propelled by speculation that the Fed may begin cutting back QE shortly appears to have been overdone. This has taken some of the pressure off of commodities. The retreating greenback has also lit a fire under resource currencies with AUD and NZD rebounding strongly out of depressed conditions. CAD, NOK and SEK have also posted strong gains today along with GBP. Gold and silver have also been capitalising on the USD retreat. Along with USD, CHF finds itself at the bottom of the league table while JPY is in the lower half. This suggests that capital is once again moving out of defensive havens and back out into risk markets. EUR has not rebounded, however, lagging on broad speculation of another ECB interest rate cut later this week. Stock market action has been mixed this morning. Asia Pacific markets sold off to start the week with Japan in particular being hammered again on follow through from Friday’s US late retreat and the mixed Chinese PMI. European markets started lower but with the notable exception of the FTSE, have regained their footing to post small gains on their PMI numbers. US markets have been heading higher so far this morning but with a number of key indicators yet to come, could be active through much of the day. Economic News Significant economic announcements released overnight include: Manufacturing PMI data is out from around the world. Highlights include: China official 50.8 vs street 50.0 and previous 50.6 China HSBC 49.2 vs previous 50.4 China service 54.3 vs previous 54.5 India 50.1 vs previous 51.0 South Korea 51.1 vs previous 52.6 UK 51.3 vs street 50.3, previous revised up to 50.2 from 49.8 Germany 49.4 vs street 49.0 France 46.4 vs street 45.5 Spain 48.1 vs previous 44.7 Italy 47.3 vs street 46.2 Greece 45.3 vs street 45.0 Eurozone 48.3 vs street 47.8 Russia 50.4 vs previous 50.6 South Africa 50.4 vs street 49.9 Other major announcements include: Australia retail sales 0.2% vs street 0.3% Economic reports due later this morning include: 9:00 am EDT US Markit manuf PMI street 52.0 9:00 am EDT Brazil manuf PMI previous 50.8 9:30 am EDT Canada manuf PMI 9:30 am EDT Singapore electronics index previous 51.2 9:30 am EDT Singapore PMI previous 50.3 10:00 am EDT US ISM manuf PMI street 50.9 vs previous 50.7 10:00 am EDT US construction spending street 0.9% 10:30 am EDT Mexico manuf PMI North American Indices US30 bounced up off of 15,120 with more support in place near 15,000. Currently near 15,180, next resistance on a bounce appears near 15,400 then 15,530. SPX500 is trying to build support near 1,635, a key support level. On a rebound, it could bounce toward 1,655 or even 1,685 over time but if it fails, a 23% retracement and retest of $1,600 appear possible. NDAQ100 held 2,975 support, setting a higher low but remains below 3,000 and in the lower half of a 2,960 to 3,050 trading channel. US SmallCap 2000 is stabilizing near the middle of an emerging 970-1,000 trading channel. Canada60 (Toronto60) had dipped under 724 but appears now to be holding near that key level with resistance I n the 730-732 area and support near 715. Commodities Gold continues to attract support at higher lows and appears to be under accumulation but really needs to retake $1,400 to confirm this. Next resistance on a breakout near $1.420 ten $1,445 and $1,460. Support now near $1,385. Silver is holding above $22.00 and RSI has broken out of a downtrend, both encouraging signs but the price needs to take out a downtrend resistance line near $23.00 to confirm a turnaround with next resistance near 423.30 then $24.80. Platinum is breaking out of a three-month downtrend today driving through $1,480. A move above $1,500 would confirm a new uptrend with next resistance near $1,515 then $1,555. Copper continues to base build, forming a symmetrical triangle between $3.22 and $3.36. US crude is holding near $92.00 for not but remains in a downtrend confirmed by RSI under 50, unless it can get back above $93.75. Downside support appears near $91.30. UK crude is having a nice bounce up off of $100.80 support today on improved sentiment toward Europe, rallying to test $102.00. On a break through there, $104.00 could be tested. Gasoline is sitting on $2.80 trying to decide if it wants to drive on toward $2.96 or slump back toward $2.70. Natural Gas is breaking down again today, taking out both $4.00 and trend support, while RSI moving under 50 suggests momentum turning bearish. Next key support appears near $3.85 then $3.60. Corn continues to form a bullish ascending triangle base below $6.85, supported by RSI suggesting upward momentum improving A breakout would confirm the start of a new uptrend with next resistance near $7.00 then a measured $7.40. Soybeans are breaking out of a symmetrical consolidation triangle through $15.40 today, signalling the start of a new upswing. The channel high near $15.85 emerges as the next key channel test followed by a measured $16.40. Wheat has climbed back above $7.00 back into the upper half of a $6.70 to $7.35 trading channel. Rising RSI suggests upward momentum building. FX USDCAD continues to show signs of exhaustion with resistance falling from above $1.0400 toward $1.0390, RSI rolling over and the pair slumping back toward $1.0350. Key support appears near $1.0330 and $1.0300 which if broken would signal a major trend change. EURUSD has drifted back under $1.3000 with support near $1.2935 and resistance on a bounce near $1.3060. GBPUSD is rallying today, accelerating up out of Friday’s breakout through $1.5200 which may become support. Next key resistance appears near $1.5400. USDCHF remains supported above $0.9540 but faces initial resistance near $0.9630. RSI holding 50 suggests a broader uptrend continues to emerge with next key resistance near $0.9700 then $0.9780. USDSEK is falling back from the high end of a 6.30 to 6.70 trading channel, currently trading near 6.60. USDNOK continues to form a bullish ascending triangle within a 5.70 to 5.90 trading channel with next measured resistance near 6.10. A break of 5.80, however, would signal a trend reversal. USDZAR continues to bump up against 10.00. With monthly RSI overbought, major resistance approaching near 10.30, precious metals stabilizing and USD weakening, this could be due for a reversal with initial support near 9.35. USDMXN is building on last week’s channel breakout through 12,60. Next Fibonacci resistance appears near 13.00 (38%), 13.31 (50%) and 13.60 (62%). CMC Markets is an execution only service provider. The material on this site (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.