The US dollar softened across the board in thin holiday markets. News developments were light and the dollar’s decline did not seem to be sparked by anything particular. Commodity prices moved higher, though oil consolidated its recent gains.
News that China had ordered the closure of its largest copper producer (Jiangxi Copper) for at least a week to cut the winter pollution underpinned prices. Prices rose to a fresh three-year high before profit-taking was seen in North America. Still the advance seems set to extend for 15 consecutive sessions.
Anticipation of strong demand as the synchronized global expansion was the main fuel of the rally in copper, which is up by about 30% this year. The supply disruption is notable, but previously the second largest producer had also been ordered to shutter output for the same reason. On one hand, it might make sense from an environmental point of view. On the other hand, it underscores the state’s seemingly arbitrary encroachment into the economy, which puts off some investors.
In any event, the rise in commodity prices helped give the dollar-bloc currencies a lift. The Australian dollar surged through $0.7740, which we had noted was the 38.2% retracement of the slide from early September. It stalled near $0.7780, the 100-day moving average. The 50% retracement is seen near $0.7815.
The Canadian dollar was bid. It had toyed with five-month lows earlier this month and now is flirting with two-month highs. Given the thinness of market conditions, so leeway may prudent. It may take the greenback to be sold through CAD1.2590 to signal a breakout.
The euro extended its recovery from the mini-flash crash on Christmas morning in the US that saw a three-cent tumble (to ~$1.1550 according to Bloomberg) before the market began functioning. With today’s gains, the euro is again testing the downtrend line drawn off the September 8 and November 27 highs. Today, it was found near $1.1915 and the euro’s high was $1.1910, as this Great Graphic created on Bloomberg shows.
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