Commodities' strength sapped by USD rebounce

Recently, there were a number of warning that the big rise in commodity prices might be peaking. One such warning was from David Roche, the President of Independent Strategy, a London-based investment consultancy, who wrote in the Financial Times (go here).

Looking at Chart 1 below, we can see that the Reuters-CRB Index has indeed corrected very sharply in the past 6 days, dropping from a high of 422 (recorded on March 13) to an intra-day low of 377 yesterday (before closing at 388). The drop in CRB index coincides with the sharp rebounce in USD index (see Chart 2 below). The correction in the CRB index has also affected many commodity prices, including CPO.

If we examine the CRB index, we can see that the immediate medium-term uptrend line support is at 370 level. This also coincides with the horizontal support at 366-370 level.


Chart 1: CRB's 3-year daily chart as at March 20, 2008 (source: Stockcharts.com)



Chart 2: USD Index's 3-year daily chart as at March 20, 2008 (source: Stockcharts.com)