CM Trading
October 13, 2015
To start this week, we're seeing the US dollar markets under serious pressure, and approaching three week lows against most of the other major currencies. The US dollar index, a broad measure of the greenback measured against a basket of currencies, is standing at 94.99, which is actually a small improvement from Friday's low reading of 94.75, but still down from this past summer.
Looking at individual currency pairs, the EUR/USD is trading at 1.1371 right now, while the USD/JPY stands at 119.74. Commodity currencies, such as that Australian and Canadian dollars, are also doing well at the dollar's expense, with the AUS/USD at 0.7300 and the USD/CAD at 1.3065. The Aussie is strongly linked to mining and metals, while the Canadian loonie is strongly correlated to oil and gold. Even the South African rand has rallied, with the USD/ZAR easing to 13.4466 – well down from its recent record of 14.1600.
All of this pressure on the dollar is originating from the US Federal Reserve, which continues its refusal to raise interest rates. It's no longer a matter of keeping rates low, as the Fed acknowledges that rates have been too low for too long, but rather it's a matter of them not being able to raise rates in the current global economic climate. With rates low, investors are looking for profits elsewhere than the dollar.Gold and emerging market currencies have all gained from this.
The biggest beneficiaries have been the precious metals. Gold and silver are both well up, as is platinum. Gold is currently trading for $1,154.83 per ounce, a level it hasn't seen since the end of August, while silver is trading for $15.67 per ounce, just below its June price. Both metals are somewhat volatile, and have been testing their repeatedly testing their resistance. Platinum, a precious metal frequently used in jewelry and industry, is currently trading at $979.15 per ounce, close to its one-month high price. For gold and platinum, these prices are very close to the price of production, making the support levels stronger than the resistance.
In other commodities, oil prices are also somewhat volatile, but towards the downside. Brent crude, the global benchmark price, is now at $49.75, down from yesterday's price of$52.77 per barrel, while West Texas Intermediate, the US price, stands at $46.88, compared to yesterday's $49.73. For both prices, this is well up from recent lows, although a definite drop from the end of last week when both were well above the $50 mark.
The oil prices are heavily influenced by production, and right now the indicators are mixed. US production is showing a slight decline as the summer's drop in active drilling rigs is finally being felt; OPEC countries have refused to cut production, preferring to retain market share in a price war with US shale producers, but OPEC is also predicting higher demand and prices next year; and the with the winter months approaching, lower demand is likely to keep the global oil supply relatively high.
