Following strong US employment news late last week, analysts are forecasting a drop in the price of commodities over the next few days. The dollar has remained largely bullish to start off the week, which has lessened appetite for alternative investments like crude oil, gold and silver.
This is likely to be especially true for oil, which has dropped close to $3 since the latest US unemployment rate was released last Friday. Both gold and silver have traded relatively flat since the news release as investors continue to test the market to see where currencies like the euro and dollar are heading. Typically, a strong greenback lessens demand for commodities which are priced in dollars and are therefore less attractive to international buyers.
This week, commodities traders will want to tune in to Wednesday’s testimony from US Fed Chairman Bernanke. Investor confidence in the US economic recovery went up last week, boosting the dollar in the process. Should Bernanke’s testimony point to future growth in the American economy, the dollar will likely maintain its current trend. As a result, gold, silver and oil may turn bearish.
In addition, attention should be given to the UK’s MPC Rate Statement set for Thursday. At this time analysts are predicting the UK to maintain their current interest rates. Unless the MPC indicates prospects for long term growth in the British economy, currencies like the euro and sterling are likely to go down, which may also cause commodities to remain bearish.
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Dan Eduard is a Market Strategist with ForexYard. His addition to the ForexYard team has brought a unique new perspective to our clients. Dan's ability to compare and contrast trans-national issues with events in the market is uncanny and many clients so far have used his advice to make leaps and bounds in their trading strategies. He has been published on the ForexYard Trading Blog and affiliate websites. He carries a BA in Political Science and an MA in History.
