Euro Decline puts pressure on oil prices

[dan_s]

“The multi-nation currency broke below the 2011 low of 128.70 and may now leave the basement door open for a full retracement to the 2010 low at 118.74. The decline is helping push the Dollar Index up, testing its 2011 high at 81.63. A breakout here may allow for the Greenback to continue trending into the high 80’s. Should this occur, dollar denominated commodities may find the path of least resistance to be downhill.” The DX did manage to close the week above the aforementioned level. As such, I believe we will now witness a test of strength in the Dollar’s trend and see whether or not price action can continue to push higher. The move has been well supported since the beginning of November, as pullbacks have been contained at the upward sloping 20 Day Simple Moving Average (DMA). I would consider consecutive closes below this average as a sign the trend may be weakening or reversing.



Until then, the recent downward pressure some commodities are feeling may continue. This was evidenced in the Continuous Commodity Index (CCI). While past performance is not necessarily indicative of future results, prices have been declining since April of last year, which coincides with the Dollar’s bottom. This past December, the slide prompted the CCI to fall below its 3-year old uptrend line. Recent attempts to break back above the trend line have been futile. This past week gave a prime example. The early week, short lived move, fueled mostly by oil’s geopolitical price spike and the Florida chill felt in many orange groves, gave false promise to many commodity bulls. The index was unable to break back above the trend line and reversed lower, resuming its down trend.