The Loonie Takes Flight
Canadian Dollar: December Canadian Dollar futures rose to new intraday highs as traders began accumulating currencies in commodity-exporting nations. Canadian retail sales came in above analyst expectations, which helped stabilize prices above the 1.0325 mark. The strong retail number was led by auto sales, suggesting that confidence in the economy is very strong, as consumers tend not to purchase big ticket items in times of uncertainty. The Loonie did begin to drift away slowly from intraday highs as traders took some profits off the table, fearing being stuck in long positions at all-time highs. During the late-2005 to mid-2006 commodity bull run, traders began to accumulate commodity related currencies such as the Canadian and Australian Dollars to synthetically trade the commodity markets as a whole, while avoiding the violent price swings in commodities like Crude Oil and Copper. Technically, the daily December Canadian chart appears to indicate some consolidation or possibly a small correction ahead. The RSI recently peaked on October 15th, but the market continued to trek higher, which is typically seen as bearish. Since the beginning of the month, momentum has slowly drifted lower, even as prices have risen to record highs. Support comes in at 1.0175 and 1.0100, while resistance can be found at 1.0400 and 1.0435.
RBOB: While the Crude Oil market has been grabbing headlines, Gasoline prices have quietly risen to all-time highs. Whether RBOB prices are able to sustain these high levels remains to be seen. Refinery capacity has been underutilized compared to prior years, Heating Oil demand figures to get a seasonal rise and any type of military action by Turkey in Iraq will probably disrupt supply. On the other hand, Gasoline demand tends to diminish once the weather begins to cool and the seasonal trend is for lower inventories. Traders will probably be keeping an eye on the finished products numbers more so than Crude inventories. A sharp rise in distillate inventories would likely cause a sell-off, provided nothing changes on the geopolitical front. Mastercard reported that Gasoline demand is down 1.0 percent for the week, which can partially be attributed to the rising cost of fuel. December RBOB seems to have found some support in the 2.11-2.12 area. Momentum is beginning to show bullish divergence from RSI and price trend, which suggests short-term upside bias. The last three days of selling were partially driven by the overbought conditions on the RSI and slow stochastics. In addition to 2.10, support comes in at 2.07 and the 38.2 percent retracement of 2.04, while resistance can be found at 2.14 and contract highs of 2.19.
Wheat: Wheat closed limit-down in the December contract, as traders adjust for what is typically a weak export season. The thinking that Russia may hike export taxes more than previously stated spilled over to Monday's session, but traders lost faith in the news yesterday, which pulled the rug out from underneath the market. The lack of news has caused traders to get antsy and liquidate positions. Wheat also suffered a small technical setback, with the market unable to breach the 18-day moving average to the upside. The market is lower overnight, and December Wheat is trading below the 50-day moving average as of the 6:00 AM CST eCBOT halt. This would probably be viewed as a weak technical signal longer-term, as the contract has not traded below the average since mid-May. After confirming a head and shoulders top, the market did bounce a bit, but a close below recent lows could trigger an extended sell-off. Momentum has been weak and has outpaced both price and RSI to the downside. Support comes in at 815.50 and 760, while resistance can be found at 878 and 910.
Rob Kurzatkowski, Commodity Analyst
