Commodities rebound

The US Dollar Index continues to respect support at 81.00, indicating another test of resistance at 83.50 on the Weekly chart. Breakout would offer a target of 86.00*. 63-Day Twiggs Momentum oscillating above the zero line indicates a healthy up-trend.

US Dollar Index

* Target calculation: 82 + ( 82 – 78 ) = 86

Spot Gold similarly respected support at $1530 per ounce and is headed for a test of $1640/$1650. Confidence in the introduction of QE3 has strengthened support. Breakout above $1640 would indicate a rally to $1800. 63-Day Twiggs Momentum below zero, however, warns of a primary down-trend. Breach of primary support at $1530 would confirm.

Spot Gold

* Target calculation: 1550 – ( 1800 – 1550 ) = 1300

The 2-Hour chart displays a flag formation over the last two days. Upward breakout (above 1620) would signal a test of $1640.

Spot Gold

* Target calculation: 1620 – ( 1620 – 1600 ) = 1640

Brent Crude retraced sharply to test resistance at $100 per barrel, fueled by rising hope of recovery in Europe and tensions with Iran. Penetration of the declining trendline would suggest that a bottom is forming. Respect of resistance, however, would indicate a decline to $80, with the long-term target at $75*. A 63-day Twiggs Momentum peak below zero would strengthen the bear signal.

ICE Brent Afternoon Markers

* Target calculation: 100 – ( 125 – 100 ) = 75

Crude is not the only commodity driving prices higher. The CRB Non-Energy Commodities Index is testing its upper standard deviation channel. Breakout would indicate that a bottom is forming. Recovery of 63-day Twiggs Momentum above zero would complete a bullish divergence, indicating reversal to a primary up-trend. Respect of the upper trend channel, on the other hand, would indicate a decline to 240*.

CRB Commodities (ex-Energy) Index

* Target calculation: 260 – ( 280 – 260 ) = 240

2 Replies to “Commodities rebound”

  1. I was interested to know why you think there will be a QE3 prior to the US elections? I assumed that the Feds would prefer to stay neutral & not to be seen to induce influence. Curious to pick your brain. Thanks Marise

    1. QE3 could occur before or after the election. The Fed will act if the threat of further deflation looms. In the long run QE is inevitable, not only in the US, in order to reduce the public debt load and rescue banks from the private debt contraction.

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