Currency market: WTI, Cocoa and EUR/USD, US Dollar Index triangulation trades

Brian Twomey Brian's Investment

Commodities trade as correlations to either DXY or EUR/USD due to permanent and opposite -90% correlations from averages dating to 1999 and beyond.

XAU/USD correlates to EUR/USD at +23%, +81%, +8%, +2%, +2%.

DXY negatively correlates to XAU/USD at -15%, -66%. EUR/USD wins at correlations because EUR/USD and XAU/USD are the same exact currencies and classified as risk assets.

The speculation for Commodities is EUR/USD beats DXY to correlations across all Metals including Copper. DXY beats EUR/USD Correlations in Grains, Softs and Energy. While EUR/USD owns Metals by correlations, DXY owns Agricultural Foods, Drinks and Oil.

The natural transition is add Commodities to triangulate currency trades. Long EUR/USD and XAU/USD is matched by short DXY or any USD currency as USD/Other Currency.

WTI

WTI trades 72.08 and 78.13 Vs 81.68 and 83.78. Above 83.78 targets 95.20. Below 72.08 targets the range from 72.08 to 68.18 at the 5 year average.

Inflation Vs WTI Correlations runs: +2%, +68%, +62%, +84% and +82%. Inflation Vs WTI last month ran as: -3%, +72%, +67%, +85%, +85%.

Inflation Averages short term run as : 3.5, 3.95, 4.22, 4.49, 5.48, 5.73, 4.59, 4.06. The overall big line is located at 6.00's.

DXY Vs WTI Correlations factor as +48%, +6%, +34% and +53%. EUR/USD Correlates negatively to WTI.

WTI trades fairly neutral as not overbough nor oversold.

Cocoa

Cocoa Vs EUR/USD runs negative Correlations across the board to averages 1 to 10 years. DXY Vs Cocoa runs positive as: +16%, -18%, +22%, +29%, +30%, +32%, +36%, +32%,.

Inflation Vs Cocoa Correlations run: -25%, -59%, -56%, -17%, -4%.

Cocoa trades massive overbought and targets 6308.03, 5121.35 and caution at 4574.73. The 5 year average is located at 2884.20 and 10 year at 2749.70.

Only trade strategy available is shorts due to severe overbought.

Author

Brian Twomey

Brian's Investment

Brian Twomey is an independent trader and a prolific writer on trading, having authored over sixty articles in Technical Analysis of Stocks & Commodities and Investopedia.

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