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Commodity Markets Turn Sound as Dollar Strengthens

James Hyerczyk from ForexHound.com at 10/26/09


Commodity markets are selling off hard at the mid-session as the U.S. Dollar is mounting a strong comeback after early session weakness.

December Gold sold off sharply as the Dollar regained strength to turn higher for the day. December Silver is making a similar move as the stronger Dollar is driving traders out of the precious metals. December Copper posted a new high for the year this morning and is giving back some of its early gains.

The U.S. Dollar traded weaker during the early part of the trading, but quickly turned around as demand for higher risk assets fell. The December Euro made a new high for the year, but failed to attract any buyers at that level. Stops were hit slightly under $1.500 to fuel the acceleration to the downside. The December British Pound has erased all of this morning’s gains which make it look like the higher prices this morning were only short-covering. A Canadian official once again expressed his concerns about the value of the currency and its negative effect on the economy. This news triggered a reversal down in the December Canadian Dollar.

Equity markets are trading sharply lower at the midsession after posting strong gains early in the session. Traders are expressing concerns about the condition of the financial sector. Many are wondering if the fundamentals can support the recent gains in financial market stocks.

U.S. Treasury markets are trading weaker this morning following the dramatic turnaround in the equity markets. The weakness in the stock markets is driving traders into the T-Bonds and T-Notes which is triggering a flight to safety rally. Traders remain cautious about aggressively buying Treasuries ahead of this week’s auction.

The grain complex is trading lower this morning. The higher Dollar is encouraging traders to take profits in December Corn, December Wheat and January Soybeans following an almost month long rally.

December Crude Oil has also turned lower. Concerns over the economy and oversupply are encouraging traders to take profits at current levels after a recent run-up.

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