George Davis, Chief FIC Technical Analyst at RBC Capital Markets, looks at the intermarket relationships currently affecting commodities and discusses their medium- to long-term outlook.
Of note, he finds that the negative correlations between gold and US 10-year yields and gold and USD (specifically USDJPY) are near historical highs. On the other hand, oil prices are having less of an impact than usual on rates.
Davis relates such observations to an estimation of where we are in the commodity supercycle and concludes that the commodity supercycle is attempting to trace out a bottom. In fact, he thinks the commodity currencies may have already reached major lows. He also expects greater commodity volatility ahead having confirmed a head-and-shoulders reversal pattern (see Chart).
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