Commodity Futures Trading - Charts, News, and Analysis

Picking tops and bottoms has always been a risky way to trade…it’s a low percentage loser’s game. But that never stops traders from trying to do exactly that time and time again! There is currently a lot of talk of a bottom in the U.S. Dollar and for that we can look to three charts: the U.S. Dollar Index, the USD/CAD, and crude oil.

The relationship between the dollar and crude is established and should come to no surprise to traders of these two markets.

The inverse relationship can clearly be seen here on the chart above.  Finding the correlation between the U.S.  Dollar and the USD/CAD take a little deeper look.

Here’s where it gets interesting.  The dollar-canada spot rate (in color) actually started its upturn before the dollar (in black & white) did.

The Canadian Dollar has been the strongest currency over the past few months as it’s rise versus the U.S. Dollar can been seen on the chart as the trend on the chart has been steadily lower all of 2007. 

If the U.S. Dollar will indeed make it’s turnaround now, it will likely be the USD/CAD chart that will signal the shift.  Add to that the pullback on the crude oil chart, the Canadian Dollar has just a little more reason to lose ground versus the heavily shorted U.S. Dollar.

Before getting too carried away with a single up day on the Dollar Index though, consider that the dollar has had bounces that were shorted and currently the Dollar Index has fallen back below the 76.00 psychological level.  The main distinction with the most recent dollar bounce is the Canadian Dollar weakness.  It’s long way from a bounce to a reversal but it all starts with these kinds of small signals and shifts in correlated markets.

Crude oil is down -1.04 today the geo-political concerns seem to to waning. Be cautious of shorting this move. The way in which the charts climbed hardly suggest that the rally was based on panic and worry. The uptrend was organized and while the trend was certainly influenced by the tensions abroad, it certainly was not the sole cause.

The overall trend is up and Wave support is at 82.52 and any pullback to this level would be considered a correction on the daily chart but not a reversal.  There will be buying opportunities arising from the weakness, take advantage of swig entries long.

If a picutre is worth a thousand words…a CHART is worth far more.

The U.S. Dollar on the following two charts in in color, while the crude oil and gold candles are in black & white.  Notice that as price continues to climb on crude and gold, the dollar continues to slide.

Here’’s the dollar and crude:

And here’’s gold…

Charts created with the permission of EZ2Trade Software.

T. Boone Pickens “the oracle of oil” said that within the coming coming, we will see $100 crude.  We’re only eleven dollars from that mark and the crude market moved from 78.00 to 89.00 since October 9th.

If you’re wondering what’s been going on the in the U.S. Dollar look no further than the five minute chart.  Now this time is certainly not going to give you an idea of what the overall direction of the Dollar has been as far as battles at key intraday support and resistance levels, the very short term chart can really show you the detail.

As the dollar was gaining some strength, it looked like buyers are looking to trade through the 38.2% Fibonacci level.  But remember a pierce doesn’t mean that the level is now going to be support.  In fact here’s a current look at support and resistance on the five minute chart.

Remember that London is now closed and we’re in the doldrum hours…

As the U.S. Dollar continues to test last Friday’s Non-Farm Payroll low, gold and crude oil continue to climb higher along their respective uptrends.

The wave on the daily chart of crude oil is slightly leveling off but there is plenty of support at the top line of the Wave and the 38.2% Fibonacci level.  Crude oil is currently trading at the 80.00 level.

Gold is trying to test the prior high at 753.90 but first it has to find buyers above 750.00 which it is currently not able to even as the Down Jones Industrials are trading down 102.

Buyers seemed poised to make a run at 79.00 as prices rallied all Monday.   Prices rallied as buyers supported 78.20 and paused after the London close just below 78.80.  Both these prices levels were minor psychological levels.  The Asian session rallied the dollar again but ran out of steam as prices topped out at 78.87-78.89.

The resistance at this level — while short of the key 79.00 level — showed that the sellers were simply waiting for a worthy bounce to short the U.S. Dollar again.  This action is interesting as it all is occurring in front of the  2:00pm EST FOMC minutes release.

Prices are currently sitting on yet another psychological level at 78.50 and this is likely to be support going into the London close.  The dollar as it trades on the daily chart is merely correcting within the overall downtrend and certainly is not near the 79.50 level that could begin the discussion of a possible reversal.

The 30 minute chart of the dollar shows the near term support at 78.50 and if this level is broken expect prices to re-visit the 78.20 low.  This low was set during last Friday’s Non-Farm Payroll which further begs the question:  What are dollar traders thinking about future interest rate decisions and inflation.  It is widely expected that Bernanke will shift focus to protecting the dollar and this means that the rate cuts are done.

The daily chart of the Dow Jones Industrial Average futures is selling off from the double top and this resistance at 14,195 and 14,205 shows the strength the psychologically relevant 14,200 has.

The overall uptrend on the Dow Jones is still in place, if anything there is sligt consolidation as prices bounce between 14,200 and 14,100.

The Dow Jones Industrial Average futures is currently trading at 14,105.

The U.S. Dollar in congesting between 78.46 and 78.69 as Friday’s Non-Farm Payroll approaches.  Traders will likely not want to “step out in front of size” before the report release which means prices will continue consolidate.

Forex traders cannot analyze the pairs in bubble. There are three key commodity futures contracts that must be followed each day - if not every trade.

The first of these is the U.S. Dollar Index futures. The U.S. Dollar is bouncing from the 77.65 low set on October 1st. This bounce has been over-analyzed as some sign of life from the U.S. Dollar but do not be fooled. The Dollar has a long way to go to show that 1) It can attract buyers above 79.00 and 80.00 and 2) That these breaks above 79 and 80 won’t simply be shorting opportunities - which is exactly what they currently are.

Fibonacci resistance is currently waiting at 78.77 which is just three ticks shy of the 78.80 minor psychological level. Beyond that, 79.00 looms like a huge hurdle that the Dollar will need some good data to overcome. Stage right: Enter the NFP this Friday. Friday will be the day that we will see whether this move north in the Dollar can stay above 78.00.

The crude oil market is another currency mover and while the pullback here has been almost four dollars recently, there are buyers at and above 80.00 as the market sits at 80.37 intraday. The market overall is still in a significant uptrend and there is a significant different between a correction and a reversal. This market has more to fall to call it the latter.

Finally gold — which has been on everybody’s must buy list it seems — has pulled back to give the bulls an opportunity as buying into a correction. There is support at the 727 level as well as at the 722 level.