February 4 – The big story today continues to be the wash-out in the dollar as those heavily invested in the greenback try to exit through an uncomfortably small door. Yet, the dollar’s break has provided only modest support at times for the broader commodity sector, with gains limited by ongoing concerns about a sluggish global economy. In fact, early-session gains have largely evaporated. Crude oil has returned to negative territory after failing to take out the top of the chart channel that has held it since October, with a similar result showing on the charts of some of the major commodity indices. Any hopes for trying to confirm a bottom for the commodity indices will likely have to wait for another day.
One commodity that has does well is gold; currently trading more than $14 higher on the day, along with the VIX, which is Wall Street’s “fear index.” Both stocks and commodities at-large have come well off their highs and are trending lower as we head into midday. Economic malaise is the story of the day once again, backed by a bearish report this morning showing fourth quarter U.S. productivity contracting 3%. Grain and livestock prices are following suit amid fears that the sluggish economy will hurt demand at a time when supplies are ample.
Weather-wise, Commodity Weather Group points out today that we should see improving conditions in South America. The Madden-Julian Oscillation (MJO) is the measurement of the cyclical nature of storm activity in the tropics that tends to influence weather patterns elsewhere. It is expected to be quite active over the next 60 days, which tends to create a constant shifting of rainfall patterns, leading to few areas becoming either too dry or too wet in Argentina and Brazil through the period.
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