Higher Dollar Index give movement in Metals and Crude Oil

Today’s move in the dollar index, while not spectacular, is still bullish. DXY, the cash index, is holding up firmly here at the 78 level. So many articles have been written about the dollar carry trade, and so many people are looking for a bounce to the 80 to 81 level, we are most likely going to have to wait for the first two weeks of 2010 to see if the trade unfolds. Currently, the charts still look friendly, from a short to intermediate term continuation rally.

In the crude oil market, Feb Crude continues its 11-day trek higher, despite the higher dollar. This most likely is fueled by Geo political issues in Iran, Israel, and in the Mid-East in general. We have had a nice 10 dollar bounce, from below 71 just 2 weeks ago. We are looking at a high so far today at 79.79. On the charts, there is resistance at 80, 81, 82 and 83. Pick your target. I am sure each one of those prices will be met some resistance.

In the metals, interestingly, we have had a mini retreat. To begin with, March silver’s 4-day rally looks like a head fake. We tested our recent lows today at the 16.75 level. On the daily charts, this looks like a low risk buy, but if these levels fail, we could quickly move down to 16.40 or 16.20. So that’s a caveat about speculating in this silver.

In Feb gold, the down move is less dramatic, however, the contract must settle above the 1120 level to have its short-term trend return to cautiously bullish. Right now, it looks like the recent pop was nothing more that a short covering rally.
Again we will have to wait til the first three weeks of 2010 to get a better sense of where the money flow will take gold and silver, regardless of what the US dollar index does.

Good Trading

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