Commodities | Mar 30 2010
By Rudi Filapek-Vandyck
Scepticism remains high about the euro's medium-term fortunes as the European currency made a swift come-back from the doldrums these past few days. This morning the euro is trading at 1.3484 against the USD and that certainly is a lot higher than most FX experts would have expected at the end of last week.
Regardless, technical analysts remain of the view EUR/USD will have to break above 1.3505 at the very least to genuinely start a bullish uptrend. Most predict more will be needed.
The strong bounce for the euro has had the pleasant side-effect for investors that most commodities have grabbed the opportunity to rally and this, furthermore, has led to technical signals now turning positive for copper, aluminium and for nickel (while others moved to Neutral from Negative).
All of a sudden market talk is again about copper (at a 19-month high already) reaching beyond US$8000/t and about nickel stretching its rally to US$24,900/t and further.
Technical chartists at Barclays Capital put the focus on zinc this morning, labelling zinc's performance these past days nothing less than “impressive”. As long as the metal's price remains above US$2130/t, argue the chartists, the focus should remain on higher prices.
They see a near term target of US$2540/t and a medium term target of US$2800/t.
Despite crude oil's equally impressive run up, the overall view remains that unless crude oil prices break above US$83/bbl decisively, its price is likely to remain capped within the recent trading range of US$83-79/bbl.
Note that fundamental analysts at Barclays remain firm advocates that crude oil prices are on their way to new market dynamics and this should translate into a higher trading range. They believe we are witnessing the early transformation of this process.
Analysts at Standard Bank have started to question whether nickel prices are not surging too rapidly, suggesting time might have come (or will arrive shortly) for some consolidation post recent strong gains – a view not necessarily endorsed by everyone.
Meanwhile, gold simply refuses to enjoy similar momentum. Market watchers have observed investors have started to ignore gold, playing the likes of copper, nickel and crude oil instead (more momentum, more profits to be made).
The number of long positions in the gold market has steadfastly declined over the past weeks. This has now led to the observation that overall sentiment is near levels considered to be “bearish extremes” from a historical perspective. This has translated into net speculative longs in the market reaching the lowest levels since April 2009.
Is this a signal gold should be ready for a rally soon? Maybe, say the experts, while such market positioning intrinsically bodes well, it is in itself not a catalyst for the gold price to move higher. But if a catalyst announces itself, things can then change very quickly.
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