Strategy Report

Crude Tests Its Trend, Commodity Currencies Do the Same

Risk appetite and commodity trends typically move more-or-less in tandem. However, there are times when they the link wanes or even breaks down. This correlation has certainly ebbed over the past 48 hours. Since Monday’s follow through on the G8 meeting outcome, sentiment winds have clearly died down. However, some of the commodity bloc currencies (especially those valued against the Japanese yen) have extended and even accelerated their declines. Now with crude – one of the key natural resources for many of the commodity-heavy export nations – on the verge of breaking a mature trend; we see the Australian, Canadian and New Zealand dollar’s threatening the same. The technicals are clear; but the fundamentals are still murky. Uncertainty surrounding the Iranian presidential election protests and North Korean aggressions have put the energy market on edge. One thing is certain though, a breakout of this caliber can trigger a shift across asset class boundaries.