Strong Dollar Likely to Influence Commodity Markets

Forex traders may want to take a look at the futures markets for a clue as to the direction of the Dollar.  Gold is definitely a good inverse indicator of the direction of the Dollar.  Crude Oil is often associated with the Euro and the Canadian Dollar.  Equity markets usually move inverse with the Japanese Yen.  Treasury futures are good indicators of the direction of interest rates which influence all currencies.

The Canadian Dollar, Australian Dollar and New Zealand Dollar are often called the commodity currencies.

CURRENCIES

SEPTEMBER BRITISH POUNDS

The September British Pounds closed lower on Friday in holiday shortened trading. This market also finished the week lower after posting a new high for the year at 1.6742. The closing price reversal top which was formed on the weekly chart will be confirmed next week if this market breaks 1.6300.

A confirmation of the reversal top could be an indication of a major top if there is follow- through selling. In addition, a break through the Main Bottom at 1.6185 will turn the main trend down on the daily chart.

SEPTEMBER CANADIAN DOLLAR

The September Canadian Dollar closed slightly better on Friday. The chart suggests that this market is trying to establish support inside of a major retracement zone at .8638 to .8487. A new Minor Bottom has been formed at .8576.

SEPTEMBER EUROS

September Euros continued the break from this week’s high at 1.4202 but stopped at a 50% retracement level at 1.3943. A follow-through break to the downside may be limited by the .618 level at 1.3894. The two lower bottoms at 1.3792 and 1.3736 are indicating weakness. The lower close on the weekly chart following the strength earlier in the week is also a sign of lower markets to follow.

SEPTEMBER JAPANESE YEN

The September Japanese Yen close virtually unchanged on Friday in limited trading. Based on the Minor Range of 1.0125 to 1.0551, this market found support this week at the 50% price of 1.0338. A failure to hold this level could weaken this market further to 1.0287. On the upside, a rally through 1.0551 will change the Main Trend to up. A weaker stock market next week could help accelerate this market to the upside.

SEPTEMBER SWISS FRANC

The September Swiss Franc closed lower on Friday and for the week. Based on the lower bottom pattern over the past month, the Main Trend is down. The current break has been labored however, because of a retracement zone at .9176 to .9111. Until this market can shed this retracement zone, look for choppy two-sided trading. Last week the Swiss National Bank once again threatened to intervene if the currency continued to appreciate. If it does take action then look for the start of a sharp decline if support fails.

FINANCIALS

SEPTEMBER TREASURY BONDS

September Treasury Bonds closed lower on Friday but finished the week higher. The Main Trend is up. The trend will turn down if 117’11 is violated. The daily chart indicates that this market is on pace to reach a major retracement level at 121’02 next week.

SEPTEMBER TREASURY NOTES

September Treasury Bonds closed unchanged on Friday in a short-trading session. Despite the slow day this market was able to hold on to its gains for the week. The Main Trend is up. The trend will turn down if 115’21 is broken. Short-term support is at 116’10. A close over 117’04 will be a strong indicator of higher markets to follow. Looking at the longer term picture, this market may attempt to retrace to 118’18.

SEPTEMBER EURODOLLARS

The strong close in the September Eurodollar has put this market in a position to take out the high for the year at 99.42. The weak U.S. economy is forcing short-term yields lower. 

METALS

AUGUST GOLD

August Gold closed lower but the Main Trend remained higher as this market was not able to penetrate the last swing bottom at 922.70. Based on the short-term range of 913.20 to 949.00, new support may be established at the retracement zone at 931.10 to 926.90. On the upside, this market is still having trouble breaking through a retracement zone at 952.60 to 962.00

SEPTEMBER SILVER

The Main Trend is down in September Silver. A new main top was formed at 14.34. Further weakness is indicated by the close under the retracement zone at 14.04 to 13.52. This market will have to regain 13.52 in order to re-establish the support. If down side momentum continues then this market may break 13.00 this week.

OCTOBER PLATINUM

Despite the weakness in the precious metals, October Platinum is still finding support inside of a retracement range of 1194.50 to 1168.70. The uptrend will be reaffirmed by a trade through 1218.40. The trend will turn down on a trade through 1163.10.

SEPTEMBER COPPER

September Copper is showing signs of topping. A new secondary lower top was formed at 2.3690 this week. The swing chart indicates that a trade through 2.1235 will turn the main trend down. The current rally is finding resistance at 2.2933 to 2.3333. Any break may be labored by the retracement zone at 2.1828 to 2.1166. Once this area is violated and the swing bottom taken out, this market should accelerate to the downside.

ENERGY

SEPTEMBER CRUDE OIL

September Crude Oil finished the day and the week lower. The Main Trend is down. The main trend turns up on a trade through 74.25. The down trend was reaffirmed on Friday by the break through the swing bottom at 67.22. This sets up a test of a Fibonacci retracement level at 66.24. Once this price is violated this contract has room to drop all the way back to 59.47.

SEPTEMBER HEATING OIL

September Heating Oil accelerated to the downside on Friday. The weak close violated a minor retracement level at 1.7325, setting up a further decline to 1.6812. Looking at the big picture, look for this break to continue until the retracement zone at 1.6045 to 1.5229 is tested.

SEPTEMBER UNLEADED GASOLINE

September Unleaded Gasoline continued its weakness on Friday. The lower top, lower bottom formation is indicating more room to the downside. The longer-term chart indicates that this market is poised to reach 1.7239 to 1.6449.

SEPTEMBER NATURAL GAS

September Natural Gas continued its steep decline. The trend is down. The weak close put this market in a position to challenge a pair of major bottoms at 3.7280 and 3.5960.

INDICES

SEPTEMBER E-MINI S&P 500

The September E-mini S&P 500 finished the week in the low end of the range. The attempt to rally earlier in the week failed at 928.25 and the subsequent sell-off seems to have the momentum to challenge the recent bottom at 884.25. A break through this price will do some serious damage to the pattern but not as much as when 871.00 is violated.

SEPTEMBER E-MINI NASDAQ

The September E-mini NASDAQ closed lower for the week after failing to attract any buying interest when it traded up to 1496.25. Expectations are for this trader to go after the last swing bottom at 1412 from the get-go on Monday. A trade through this level will turn the main trend down. The charts indicate room to break all the way to 1342 to 1337.

SEPTEMBER E-MINI DOW

The weak close in the September E-mini Dow has this market in a position to take out the last swing bottom at 8194. A break through this level will reaffirm the down trend and set up an even further decline to 8144 and 8128. This market could fall apart when these areas are violated.

GRAINS

NOVEMBER SOYBEANS

November Soybeans closed higher for the week despite a horrific sell-off on June 30. The catalyst for the turnaround was news that Argentina may halt the export of soybeans. Technically this market found buyers at a 50% price at 9.41 ¾. Based on the main range of 10.99 ½ to 9.43 ½, 10.21 ½ to 10.39 ¾ is a key retracement zone. If upside momentum continues then look for the market to attempt to blast through this zone. So far the market has done very little damage to the 50% at 10.21 ½ when it tested it later in the week. This means to watch for a pullback to 9.86 ¼.

DECEMBER SOYBEAN MEAL

The December Soybean Meal finished the week higher in a spectacular turnaround after the USDA crushed this market with bad news on June 30. The main trend is down but news that Argentina may cut exports of grain scared shorts into covering late in the week. Although this market never reached a downside objective at 286.00 to 272.80, the strong rally late in the week sent this market back to an upside retracement zone at 316.70 to 322.60. This market could turn bullish again if this area is violated.

DECEMBER SOYBEAN OIL

Unlike the soybeans and meal, the December Soybean Oil is still struggling to establish support. This week this market tested a major retracement zone at 36.15 to 34.90. Regaining 36.15 indicates that shorts may be covering but there is still no sign of real buyers. The main trend is down. A trade through 37.98 will turn the main trend to up. A breakout over this price may find selling pressure at 38.49 to 39.19.

DECEMBER CORN

December Corn is a tough market to call at this time. The USDA hurt this market on June 30 by announcing greater than estimated planting. This drove the market through the March low and close to the December 2008 bottom at 3.49 ½. The tricky part about corn this week is that the seasonal high is due July 6th. Since the market is already down, it will be interesting to see if shorts cover in an effort to get this market back up to a more reasonable price to short. Watch for bottoming action.

DECEMBER WHEAT

December Wheat continued its decline last week. This market has gone straight down since the top at 725 ¼ on June 1. No one wants to buck the trend so buyers have been scarce especially since the fundamentals support a bearish market. Technically however, this market may have to retrace to attract more selling. This is why it may be better to try to catch a short-covering rally rather than try to sell it in the hole.

SOFTS

SEPTEMBER COCOA

September Cocoa closed lower for the week. Technically the main trend is still up and trying to establish support at a major retracement zone at 2516 to 2435. The last main bottom has been formed at 2426. Combined with the main top at 2858, look for a possible retracement rally back to 2642 to 2693. A break through 2426 could trigger an acceleration to the downside. A stronger Dollar could do damage to this market.

SEPTEMBER COFFEE

September Coffee finished the week lower but held the new main bottom at 117.55. It looks as if traders are supporting this market ahead of the two main bottoms at 116.40 and 115.00. Regaining a major retracement level at 122.70 will be a sign that a recovery is taking place. Based on the main range of 144.80 to 117.55, a retracement to 131.20 to 134.40 would be the best price to sell, but a move to this zone would be unlikely this week. A failure to hold 117.55 should accelerate this market to the downside especially if the Dollar strengthens.

DECEMBER COTTON

The strong rally in the soybean market carried over to the December Cotton market this week. The strong close has this market in a position to take out the last main top at 61.69. Although the main trend will turn up on this move, the subsequent rally may be labored because of the two tops at 62.30 and 63.75. Based on the main range of 63.75 to 54.77, this market has completed a retracement to 59.26 to 60.32. This market is at a critical point on the charts. A failure to hold 59.26 will indicate weakness and the start of a break to 58.03 to 57.26.

SEPTEMBER ORANGE JUICE

September Orange Juice had a closing price reversal on the weekly chart. This could be a sign that the seasonal bottom is in. A trade through 80.40 will confirm the reversal bottom and could trigger the start of a rally to at least 88.20. A trade through 82.10 turns the main trend up. Stops are likely to get hit over this price. All it will take fundamentally is a hurricane scare to trigger the breakout.

OCTOBER SUGAR

The Main Trend is up in October Sugar but the rally appears to be stalling. This market is being fundamentally driven because of the global shortage of Sugar. India is the key to this market. At this time they are experiencing crop issues which are supportive, but if global demand drops because of high prices, look for a short-term correction back to 17.14 to 16.85.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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