The strength of the dollar impacts the commodity market

Juni 21, 2021 14:00

As we discussed last week, Jerome Powell rekindled rumours of a possible tapering during his press conference after the meeting of last Fed meeting, and this has been reflected in the financial markets as the US dollar has experienced a strong rebound in recent sessions, generating sharp declines in the EURUSD and GBPUSD, and a strong rebound in the dollar index which strongly bounced from the 90.00 USD to 92.50 USD, surpassing its average of 200 sessions.

Last April, we commented that the weakness of the dollar drove commodities. As the main beneficiary of this former situation, gold has been among those hit the most, with an upward structure after confirming the formation of a triple ground in the red at the end of last March, where a new upward momentum began that led it to break up the bearish channel that had been following since its historical highs.

This break caused a triple cross of bullish averages that supported gold in its new trend in search of its main resistance level represented by the green band, although after the latest events due to the increase in inflation in the United States, gold has turned strongly to the 61.8% Fibonacci retracement level after breaking several support levels.

It is vitally important that gold manages to maintain this level of support if it wants to continue with the rises as a loss of this level could bring the price back to the area of annual lows in the lower red band, thus losing everything gained with this latest upward momentum.

Source: Admiral Markets MetaTrader 5. Gold's daily chart. Data range: February 21, 2020 to June 21, 2021. Prepared on June 21, 2021 at 12:00 pm CEST. Please note that past returns do not guarantee future returns.

Evolution in the last 5 years:

  • 2020: 21,86%
  • 2019: 15,45%
  • 2018: -3,22%
  • 2017: 12,75%
  • 2016: 10,12%

In the case of Brent, against the strength of the dollar, it managed to close last week with a rise of 1.13%. This can be explained by positive future prospects around this important raw material thanks to the improvement of the pandemic situation at the global level, and the reopening of economies due to the advanced vaccination process. In addition, these prospects were reinforced after OPEC published an optimistic report regarding its future expectations for 2022, in which it is forecast to have a strong rebound in consumption with a possible increase in production of 1.4 million barrels per day by each member of the group.

Technically speaking, so far this month it has scored 6% to recover at times the 75 USD per barrel. Currently, the price is struggling with its main resistance so we will have to be attentive to the evolution of the price and see if it is able to maintain its current support levels.

Source: Admiral Markets MetaTrader 5. Weekly brent chart. Data range: November 9, 2014 to June 21, 2021. Prepared on June 21, 2021 at 12:05 pm CEST. Please note that past returns do not guarantee future returns.

Evolution in the last 5 years:

  • 2020: -21,52%
  • 2019: 22,68%
  • 2018: -19,55%
  • 2017: 17,69%
  • 2016: 52,41%

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