The Economic Cycle Research Institute, which claims a perfect recession-forecasting record, says an economic contraction is imminent. “We have not seen a slowdown where year-over-year payroll job growth has dropped this low without a recession,” ECRI states in a May report.
If, or when, the U.S. (and/or the global) economy does start to contract, commodity prices will tumble because of three factors…..
via The Threat From a Recession | News | News and Events | ECRI.
Economists expect 2012 will see a slowdown in the economy of China, Australia’s biggest trading partner. China’s gross domestic product growth could slip to around 8% from more than 9% this year, which will lead to lower demand for commodities. Already, the Reserve Bank of Australia’s index of commodity prices—a weighted basket of Australia’s resource sector exports—has fallen sharply this year. The central bank says the economy’s resources-led surplus may have hit its peak and could decline “somewhat” from here.
via Heard on the Street: Australia’s Juggling Act – WSJ.com.
“….Copper is telling us that while the U.S. equity markets are being priced by such frivolous things as U.S. holiday retail sales, the global economy is experiencing a deceleration in growth [that will become evident] in the first half of next year,” said Jason Schenker, president and chief economist at Prestige Economics LLC.
WSJ: Why Are Commodities Rallying During Slow Growth?
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This month’s decoupling of oil from other risk assets, could be foretelling skittishness over recent events in Iran and Syria (where a growing chorus is calling for action against Assad’s brutality), and even over today’s report from the AFP that thousands of Kuwaitis stormed parliament after demanding the prime minister’s resignation.
Additionally, borderline hostile rhetoric towards Iran after a recent explosion at a missile base is putting more focus on their tensions with Israel…..
via Here’s The Real Reason The Price Of Crude Oil Is So Strong.
The Commodity Futures Trading Commission (CFTC) voted 3 to 2 today to limit trading in oil, wheat, gold and other commodities after a boom in raw-materials speculation, record- high prices and years of debate and delay.
The rule limits the number of contracts a single firm can hold and it limits traders to 25 percent of deliverable supply in the month nearest to delivery.
The CRB Commodities Index gapped down to its lower trend channel in response to turmoil in Europe and the resulting stronger dollar.
The Aussie followed its Canadian counterpart below parity, confirming a primary down-trend with an initial target of $0.94*.
* Target calculation: 1.02 – ( 1.10 – 1.02 ) = 0.94
The CRB Commodities Index is trending downwards in a broad trend channel after a failed rally to test resistance at 350. Expect a test of the long-term rising trendline at 300. The 63-day Twiggs Momentum peak below zero confirms a primary down-trend.
The Australian Dollar broke support at $1.02, signaling a primary down-trend, before testing medium-term support at parity. Failure of support — and breach of the rising trendline — would confirm the down-trend and offer a target of $0.94*.
* Target calculation: 1.02 – ( 1.10 – 1.02 ) = 0.94
Rio Tinto, one of the world’s largest natural resources companies, has warned that some of its customers were asking to delay shipments of metals, in a clear sign that the financial turmoil is starting to affect the commodities sector.
The Aussie Dollar is testing support at $1.045 against the greenback; failure would warn of another down-swing to parity*. Breakout above $1.075, however, would re-visit $1.10.
* Target calculation: 1.05 – ( 1.10 – 1.05 ) = 1.00
AUDUSD is strongly influenced by commodity prices and closely tracks the CRB Commodities Index. $CRB is rising and breakout above 350 would indicate a primary advance to 385* — suggesting increased support for the Aussie Dollar.
* Target calculation: 350 + ( 350 – 315 ) = 385
