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Commodities have Mean reverted and at Critical Resistance!

A turnaround in the USD will inevitably bring lower Commodity prices. The weekly chart below of the CRB Index highlights that the commodity rally may pause and pullback as it has reached critical resistance in the form of its long term Mean and down trending T-Line resistance. Weekly momentum as measured by the CCI indicator is displaying negative divergence with price currently. Any signs of reversal from current levels could see a period of consolidation or pullback in commodities in conjunction with USD strength.

1. CRB Index – Weekly Chart: Has hit a wall of resistance!

We are keeping a watchful eye on the Aussie as it is a reliable proxy for risk and commodity trend direction. The daily chart below shows the AUDUSD trading and currently consolidating outside of its bands – a condition which suggests a statistical ‘abnormality’ and may see the pair trade back inside its bands. The 4hr chart of the AUDUSD zooms in on the current consolidation and one could make the case that price is forming a bullish flag pattern. A trade beyond channel resistance could see this bullish continuation pattern validated however, given what we are seeing in the broader USD picture we do not expect this to be the case. A confident break of 0.7625 to the downside voids the bullish flag scenario and could see the downside accelerate.

2. AUDUSD – Daily & 4hr Chart: The Aussie holds the key for Commodities!