Technicals | Sep 15 2010
By Rudi Filapek-Vandyck
Currencies have showed the way forward on many key turning points for risk assets since the Grand Meltdown in 2008. Could September 2010 turn out another such turning point?
The US dollar broke down in overnight trading session and the world is now watching and asking the question: is this the moment?
As pointed out by colleague Greg Peel in today's Overnight Report, the USD Index has now broken below its 200 day moving average. This would indicate the USD has once again made a decisive turn for the worst.
The theme has also been picked up by technical market analysts at Barclays Capital. The analysts note the break down for the USD Index comes at a time when other currencies and assets seem on the brink of a break-out to the upside.
Note the analysts: AUD/USD is currently at its highest level in twelve months; USD/ZAR is breaking five-year trendline support; USD/CHF is near its range lows for the past two years; USD/BRL equally sits at the bottom of its range for the past twelve months.
It goes without saying that a breakdown for the US dollar would translate into rallies for commodities, for currencies related to these commodities, for share prices of companies with exposure to commodities and probably for equities in general.
Note the price of gold made a big jump overnight.
State the analysts: further USD weakness in the sessions ahead might turn weakness into a rout.
The analysts continue targeting US$1350/77 per troy ounce for gold. They retain a bullish view on crude oil. They are not so enthusiastic about aluminium, but believe copper is poised for higher price levels.
Investors should note US equities did not rally higher, despite the technical break-down of the USD.
