Dollar Reversal?
RBOB – Gasoline futures fell in reaction to larger-than-expected inventories and a strengthening U.S. Dollar. While the market found early support in OPEC's decision to keep output unchanged, Gasoline inventories rose by 4 million barrels, surpassing analysts' estimates of only a 700,000 barrel rise. OPEC's decision, while bullish on the surface, can actually be viewed as a bearish statement on the U.S. and European economies, and their potential impact on demand for petroleum products. The Dollar has rebounded from recent lows and many are now seeing at least some stabilization in the battered currency. January RBOB futures fell below the 50-day moving average and early price action indicated a confirmation of a bear flag pattern on the daily chart, barring a sharp reversal. While these technical indicators are bearish, the market is very oversold short-term, which could lend some price support to the market. Support now comes in at 2.17 and 2.13, while resistance can be found at 2.25 and 2.2850.
Soybeans – Bean futures are lower in overnight trading as a result of falling energy prices and a strengthening greenback. Demand for biofuels may be curbed by the recent decline in Crude Oil. The rising Dollar may slow exports – particularly to China – and could lead to a larger-than-expected carryout as a result. Poor growing weather in South America may give the market some support and help to counterbalance the bearish factors. After closing above the $11 mark in late November, this area has offered fairly stout resistance of late. The 9- and 18-day moving averages are close to crossing over to the downside, which could be considered bearish in the near term. On a positive note, the momentum indicator continues to stay in positive territory and is outpacing RSI. Support comes in at 1080 and 1068, while resistance can be found at 1105 and contract highs of 1114.
Dollar Index – The Dollar has rebounded strongly after making lows on November 23rd, and today's rally marks the fourth consecutive positive trading session. The greenback has been aided by a recovery from recent lows in the stock market and economic uncertainty in Europe. There is now talk that the U.S. government will be offering some relief to the beleaguered housing and subprime sectors, which has given the market a lift. Speculation that the Bank of Canada and Bank of England may both cut interest rates has also made the Dollar more attractive to investors. The March Dollar Index is trading above resistance at 76.10 in early trading, and a solid close above this area – which would also signal a close above the downtrend line – could bring more longs into the market. The market is swiftly approaching near-term overbought levels due to the recent run-up, which could slow some of the momentum it has recently built. Momentum is lagging behind the RSI, which suggests that consolidation may lie ahead. Support can now be found at 75.70 and 75.15, while resistance comes in at 76.45 and 76.75.
Rob Kurzatkowski, Commodity Analyst
