The CRB index has been trending lower since late May. It fell nearly 10% to retrace 50% of the rally come June 2017. This Great Graphic shows the 4 1/2 month trendline. It had been violated in late August but fell back under it at the end of last week.
On Monday, it gapped higher, above the trendline. Today it filled the gap and rallied to new session highs. A move above 192.00 would likely confirm a bottom of some importance is in place. The technical readings on the weekly bar charts are more constructive than the dailies.
The commodities in the basket are mostly traded in US dollars. Typically, then when the dollar is strong, one generally expects lower commodity prices and vice versa. On a purely directional basis, the CRB Index and the Dollar Index have an inverse correlation of -0.65 over the past 60 days. Since 2016, the inverse correlation has rarely been stronger. This would suggest that the next move may have a weaker inverse correlation. That is to say that a favorable near-term technical outlook for the CRB Index may not have significant implications for the Dollar Index, even if there is a small negative bias.
Opinions expressed are solely of the author’s, based on current market conditions, and are subject to change without notice. These opinions are not intended to predict or guarantee the future performance of any currencies or markets. This material is for informational purposes only and should not be construed as research or as investment, legal or tax advice, nor should it be considered information sufficient upon which to base an investment decision. Further, this communication should not be deemed as a recommendation to invest or not to invest in any country or to undertake any specific position or transaction in any currency. There are risks associated with foreign currency investing, including but not limited to the use of leverage, which may accelerate the velocity of potential losses. Foreign currencies are subject to rapid price fluctuations due to adverse political, social and economic developments. These risks are greater for currencies in emerging markets than for those in more developed countries. Foreign currency transactions may not be suitable for all investors, depending on their financial sophistication and investment objectives. You should seek the services of an appropriate professional in connection with such matters. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete in its accuracy and cannot be guaranteed.
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