Recently Copper and the $USD have started to correlate with each other. While this can and does happen occasionally, it is important to be aware of trend changes.
When the $USD went on the big surge from Feb 1 to April 1, Copper did as most would expect. The price of Copper fell. After April 1, Copper kept falling, whereas the $USD reversed an uptrend and fell for the month of April making them move with each other. Then on May 1, both reversed higher but continued tracking each other. Then, both made highs mid May together and while the USD has made lower lowers compared to May 1, Copper has made a higher low. They are still trending together though.
Looking at the correlation chart, we can see that the 20 day Correlation of Copper to the $USD has been a lot closer to the $USD than back in February and March.
With the large moves in the Yen, The Aussie Dollar and the US dollar, there is some major positioning going on. Normally, with the 4 cent tumble in the $USD in 4 weeks, we would expect most commodities to move higher. $WTIC has, but Gold, Silver and Copper have not.
Metals stocks are starting to approach a stronger seasonal period in July. I continue to watch for Asian markets to improve, but they aren't turning higher yet. While everyone is on Fed watch, I would like to see how this week shapes up in Asia and the commodities. Even an oversold bounce would be a welcome retreat for those expecting optimism to find the metals. However, if they can't find a bid in a plummeting $USD, it might be even more difficult with a sideways or rising dollar.
I'll post a timely gold chart tomorrow.
Good Trading,
Greg Schnell, CMT
