Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious OutperformanceFind Stocks Now

Half of Commodities in the Red for 2022 as King Dollar Rears Head Again

Published 07/12/2022, 11:43
Updated 14/08/2023, 11:57
  • 17 of 34 commodities tracked by Investing.com show annual losses
  • Slide comes as dollar rallies anew on notion Fed may turn hawkish again in 2023 
  • How much lower could the losing commodities go before the year-end?
  • How much higher could the winners climb?
  • With just three weeks to the end of 2022, half of the world’s prominent commodities are showing annual losses as the U.S. dollar, the currency that determines their prices, rallies anew on the notion that the Federal Reserve could be aggressive again with rate hikes in the coming year. 

    Strong U.S. factory-made goods to non-manufacturing data in recent days have incentivized dollar bulls to establish new long positions in the currency against rivals like the euro and yen, putting fresh pressure on prices of raw materials that have increasingly turned from positive to negative over the past few months. 

    At the time of writing, the Dollar Index was up 10.4% on the year at 105.545. The index peaked at a 2022 high of 114.745 in September, giving it a gain of as much as 20% at that time.  

    Seventeen, or half, of the 34 major commodity markets tracked by Investing.com were in the red for the year. 

    Those with annual losses were:

     Those in the green were:

    As we prepare for 2023, a few questions remain:

    Technically, how much lower could the losing commodities go before the year-end? What’s the likely bottom on the charts?  

    On the other end, how much higher could the winners climb? What’s their potential resistance?

    SKCharting.com, our regular collaborator on commodities charting, will attempt to help us answer these, beginning with the Dollar Index, which is expected to be the main variable for the moves across commodities over the next three weeks.

    Dollar Index: Potential High and Bottom 

    After losing half its value over just two months, the Dollar Index has started rebounding since the end of last week on the strength of U.S. macroeconomic data that spawned the notion of a more hawkish-than-thought Fed in 2023. 

    For context, the Fed has added 375 basis points to U.S. rates since March, with four jumbo-sized 75-bp hikes between June and November. Up until last week, the expectation was for the central bank to impose a smaller increase of 50 bp at its upcoming Dec. 14 rate decision and continue tapering hikes in the new year. As of early Wednesday, the 50-bps hike was still on the cards, though traders weren’t sure how much the Fed would increase in February — the first rate adjustment due in 2023. 

    The Dollar Index’s chart shows a recovery from Monday’s session low of 104.065 to reach 105.765 by early Wednesday.

    U.S. Dollar Index Daily Chart

    SKCharting’s observations show that the index’s 50-week Exponential Moving Average, or EMA, of 104.50 and oversold weekly stochastics warrant a bounce back. 

    “The rebound can extend further to the 5-week EMA of 106.30 if the 105 level holds strong,” it said.

    Commodity Losers: Potential Bottom and High

    In order to keep to the main commodities or those with the biggest losses, our focus will be on WTI crude, spot gold, U.S. copper futures and U.S. coffee futures:Crude Oil Futures Weekly Chart

    WTI (-0.9%): U.S. crude continues to hover at a low altitude, in close proximity to what may prove to be a short-term bottom. It is likely to explore the 200-month Simple Moving Average, or SMA, of $72.55 and the 50-Month EMA of $71.20.

    A rebound from the support zone is likely to meet immediate resistance levels of the 100-Week SMA of 481.86 followed by the Weekly Middle Bollinger Band of $86.20XAU/USD Weekly Chart

    Spot gold (-3.0%): Bullion is seen consolidating below the 100-week SMA of $1,800 and above the 5-week EMA of $1,760. The bullish trend will likely remain, so long as prices hold above $1,760.

    Sustainability above $1,777 may be an initial signal for the resumption of an up move towards $1,800, with $1810 and $1825 as next immediate targets.Copper Futures Weekly Chart

    U.S. copper (-12.77%): Action indicates a bottom between $3.50 and $3.30 per lb.

    Beyond that, the bullish trend appears intact for copper with its Relative Strength Index at 52 above neutrality and stochastics at 76/71, favoring positivity. Copper’s uptrend also remains supported by the 5-week EMA at $3.74 and the weekly middle Bollinger Band at $3.58. Challenges to overcome remain the 50-week EMA of $3.86, followed the by 100-week SMA of $4.08.U.S. Coffee Futures Weekly Chart

    U.S. coffee (-27.44%): The market has been reeling under bearish pressure for a  fairly long time. As long as prices sustain below the 50-month EMA of $1.6740 an lb and the 5-week EMA of $1.65, coffee may continue with a bias skewed downward towards the 200-week SMA of $1.4980.

    Weekly RSI at 35 is below neutrality while weekly stochastics at 15/13 has a lazy look up.

    Commodity Winners - Potential High and Bottom

    Our focus here is on two of the biggest winners in commodities: natural gas and orange juice.Natural Gas Futures Weekly Chart

    Natural Gas (+50.08%): The heating fuel was left with a runaway gap when prices dropped below $6.22 the previous week. While current bearish pressure looks set to retest the 100-week SMA of $5.11, the recovery is more about filling the runaway gap at $6.22 and retesting the 50-week EMA of $6.38.

    Orange Juice Futures Weekly Chart

    Orange juice (+42.39%): The short and mid term price outlook remains bullish with strong positioning of weekly RSI at 61 and Weekly stochastics at 66/65. Gains may extend to $2.23 per lb, which would require a hold above $1.94. If that support gives way, then the correction could extend towards $1.87 and $1.72.

    * All charts by SKCharting.com, with data powered by Investing.com.

    Disclaimer: Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. For neutrality, he sometimes presents contrarian views and market variables. He does not hold positions in the commodities and securities he writes about. 

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.