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Commodities And Commodity Currencies At Key Juncture
Submitted by Nic Lenoir of ICAP
Copper has recently retested the former channel support now resistance. AUDUSD has tested and rejected the 50-dma, USDCLP (highly correlated to copper as Chile's main source of revenue is... well copper!) looks like it is completing the second shoulder of an inverted H&S. USDBRL has pulled back towards the overlap level at 1,80 and 50-dma at 1.7949 which now acts as support. Without a daily close below 1.79 the market should rally towards 1.90 before going to test the next resistance at 2.0350. Finally USDCAD has retraced 76.4% of the recent rally and we anticipate a rally towards 1.0780/1.0870. If this last resistance is bypassed we should rally to 1.1275/1.1300.
Overall all commodity currencies seem on a key resistance and we expect them to underperform the USD here. The trade presents a good risk reward as the stop levels can be set relatively tight. It is still our fundamental conviction that copper is vastly overbought overall, and inventory levels are far too high for the price. Copper, China, CLP, or AUD are basically all part of the same trade which in our opinion is a bubble destined to a pretty dark future... Buyers beware.
Good luck trading,
Nic
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Funny how currencies and related commodities all test resistance at the same time. Thanks for the info, especially the minor currencies!
China wants a pile of copper or a pile of greenbacks? I don't think toilet paper is a long-lived Eastern tradition.
:)
At least it appears that the Chinese Pig Farmers stashing up all that copper are a lot more resilient that the Japanese Daytrading Housewives who are gunning the FX markets....
is that an elsa peretti mesh scarf earring or a giant f'ing goitre on her neck ?
great pics, Robo & good look, Nic, thanks for it.
February 2010 Monthly Preliminary Performance Report Dow Jones-UBS Commodity Indexes ~ http://tinyurl.com/yhhbafe
Entered this trade on the Aussie during Monday morning's NY open. I was coming to the same global macro conclusions you have so thoroughly outlined. Got in above 0.9000. Looking for 0.8800 by end of March. If the RBA gets doveish on their March 4 meeting, target may be acquired sooner rather than later. In any case risk is minimal due to these well entrenched S/R levels. I say full steam ahead.
It looks like you're a little bit early on the rollover call. Perhaps you should have got in above 9150. The AUD/USD will be a grind back up to those levels but after it tops again at ~9185, it will probably drop precipitously with slightly below 8000 as the downside target. Wheee!
Good luck trading!
Generally agree. Not so sure aboput the real - the only currency with an underpriced bond market. If there is one thing I have learned it's never to decline a "giveaway" bond market.
So is this about copper, commodities, commodity currencies, China or everything at once? If it's about everything at once, it's about nothing really.
There are SO many things that can happen before China gets into trouble.
Good Analysis.
Beware 'surprises' from the RBA however as things are almost at redline again here in AUS with unemployment falling sharply. You know its a boom when remedial kids from your old high school who who dropped out in year 10 make more than your post grad ass. http://au.news.yahoo.com/thewest/a/-/mp/6839633/gorgon-workers-to-get-pa...
Long's them folks everwhere keeps a-multiplyin' away all fast like, ya'll gonna wanna err own the side o' them co-modities longer time. Why, even Mutt thar under the porch com-fa-bul wit thait. Stuff thait hurts when ya' drops it on yo' feets.
Howard Katz's latest:
http://www.321gold.com/editorials/katz/katz022210.html
Lots of people have gone broke trying to short the Aussie. Best of luck with it.
I wonder how significant of an effect this emerging development may have on the precious metals supply side of the equation?
link = http://www.miningweekly.com/article/electricity-tariff-increases-to-nega...
The 35% pa for 3 yrs increase in electricity prices will have a huge impact in the profitability of many SA precious metals miners. It is not just the direct electricity cost, but the impact on wages, which are index linked. There are several miners (Lonmin is top of my watchlist) that are not even making a profit with prices at this level and it is only going to get worse.
However, what I find frustrating is that PM stocks seem to rise and fall on price of the metals, and things like positive cash flow don't seem to matter.
The SA PM miners have huge problems - dwindling and harder to get reserves, wage inflation etc etc. Their capital models are going to come under huge pressure, question is, will the share prices even catch up to this reality?
As for copper and copper miners, this was a great trade last year, but when I see the inventory levels at the LME and the oversupply in China, prices seem very toppy.
Oil generally does well when Fed raise rates, so unless the link between CAD and WTI breaks down, I cannot see CAD falling beyind recent lows vs USD of 1.08. Strikes of refineries workers or some maintenance shutdown always seem to pop up whenever oil needs support. The squid/J Aron has too many derivatives to protect I guess, and Sprott is scratching his head all these months why oil isn't below $60 given the fundamentals. Tells you much about the world we are living in.
simple. China consume 5M mt CU, China produce 4M mt CU, China imports 3M mt CU... 2M goes to stockpile.. Sell, Sell, Sell...
NIC..AUD has been trading above its 50DMA since past 2 trading sessions..
Kondratieff Principle..................
Intereting Article........
One I hope is nt true,nut reads like the news.
http://www.theaureport.com/pub/na/5679
Rather interesting,albeit depressing Article based on the Kondratieff Cycle,interesting, except, I hope it's not where we're at, but,alas, reads like the days news,
http://www.theaureport.com/pub/na/5679
charts dont predict anything they only speak of what has already happened. there are no data points for the future. use your brain and hope you are right, but dont predict the future with a chart
SP500 / DOW / COPPER counter trend rally looks over.
SP500 futures currently 1096.
http://www.zerohedge.com/forum/market-outlook-0
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