U.S. Dollar Index:
The March U.S. dollar index dropped over two full points last week to finish at 95.93, the lowest close in over seven months. When coronavirus concerns first emerged, the U.S. dollar index traded higher with the U.S. seen as a safe haven from the initial threat. Now that infections are spreading rapidly and have been confirmed in the U.S., U.S. GDP growth is suspect in the first quarter of 2020, and the Federal Reserve announced a half-percent rate cut on Tuesday in hopes of providing early support to the economy. A rate cut is not going to stop the spread of the virus, however, and it will be interesting in the days ahead to see if the U.S. dollar index can hold support above the one-year low of 95.74. A lower dollar is typically supportive for U.S. ag prices and commodity prices in general, but in this case, could also be a bearish sign of the spreading virus. The U.S. dollar index is in a sideways range and holding support above 95.74 is the technical challenge early in 2020.
Dow Jones Industrials:
Just a few weeks ago, U.S. stocks were pushing new record highs, but that effort has quickly unraveled as the spread of coronavirus leaps to new levels. John Hopkins now shows a death count of 3,802 worldwide and rising. The Dow Jones Industrial Average (DJIA) was actually up 455 points last week to 25,865, but Friday's close was still down 13% from the February high. The sudden downdraft of prices turned the weekly stochastic from bullish to bearish in one sudden swoop and now the technical challenge will be to see if prices can hold above the one-year low of 24,681.
When the world is falling apart and investors are running for the hills, gold is often one commodity that shines in the thick of trouble. April gold jumped up $105.70 an ounce last week to $1,672.40, near its highest spot price in seven years. Increasing coronavirus fears plus the Federal Reserve's rate cut encouraged the buying in gold and helped to extend a 1 1/2 year uptrend; $1,923.70 stands as the record high for spot gold going back to 2011 so there is room for more appreciation if virus fears keep growing. The one note of caution for gold is that noncommercial net longs are up to 319,733 as of March 3, near the largest bullish bet on record. Technically speaking, the trend in gold remains up with a high degree of speculative risk and plenty of uncertainty as to how the coronavirus situation will play out.
Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities or commodity futures involves substantial risk and are not suitable for everyone.
Todd Hultman can be reached at Todd.Hultman@dtn.com
Follow him on Twitter @ToddHultman
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