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A rebound in the strength of the dollar is dominating price action across the commodity arena today, after a speech by Fed Chairman Ben Bernanke of Friday failed to give the market any firm details on the expected quantitative easing package. With this, the front WTI Nymex crude contract has been hovering around the $81/bbl level in electronic trade, while spot gold has pulled back towards $1,361/oz. Looking at the week ahead, the release of Chinese GDP data on Thursday is set to take focus in the commodity markets going forward, with players looking to the Asian giant for signs of increasing demand.

The greenback has been continuing to exert its influence on the precious complex as a whole in the session, with gold, silver and the PGM’s all showing significant selling today. Traders are also suggesting that this comes amid a lot of profit taking in the complex, after last week’s push to record highs. The weekly Commodity Futures Trading Commission (CFTC) commitment of traders report released Friday evening, gives some indication of these moves by the large speculators. For the week ending October 12, the CFTC report showed net speculative long positions in Comex gold futures increased by 224,000 contracts, not far from their record high. Net speculative silver contracts on the other hand, actually saw a net reduction in the week of 13%, or over 6,000 contracts.

From a technical standpoint, the move in gold brings a fall in 10-day momentum and nears a sell-signal in the daily stochastics, although it is worth noting that support could still be expected from the 21-day moving average at $1,331/oz, which has held over the past three months. a break below this in coming sessions however, may indicate a lack of further support and potential weakness, through to the June high near $1,265/oz.

In the crude oil market, some weakness could be expected in the front WTI contract over the next two days, as traders begin to roll their positions to the December contract ahead of the Nov10 future expiry on Wednesday, with Nymex Natural gas futures expiring exactly one week later. As with gold, the strengthening of the dollar has dominated price action in the crude market today, with similar weakness n the equity markets pushing some risk aversion in the energy complex. The ongoing strike in French ports and oil refineries has begun to take a direct toll on European oil and product prices, and if it continues it is likely these will begin to filter through, although perhaps only to a small degree, to prices on the other side of the pond, as paper accounts take advantage of arbitrage opportunities.

The CFTC report showed the extent of the speculative push on recent gains for crude, showing net speculative long positions increased by 9,700 contracts in the week, to their highest level in six months at 174,835. This can give us some indication now of the potential for downside risk that could come if the bottom falls out of this driving optimism, with those levels arguably infringing on overbought levels.

Base metals prices have been moving in-line with other commodities during the session, pressured as the strengthening dollar and risk aversion, dominate price action. The Chinese data on Thursday is set to impact the base complex in particular, with just about every industrial metal looking for growth in China to support their ongoing price recovery, following the global financial crisis. The CFTC report also showed that at least some of the recent gains in the copper price can be attributed to financial investors, with net speculative long positions in Comex copper futures increasing by around 3.3% in the week to an all-time high of 32,600 contract; again offering some potential insight into the downside risk, if these speculative positions pan out to be overbought.

In the agriculturals, Friday’s selling has continued in today’s session, after the Brazilian Sugarcane Industry Association (UNICA), reported an extra 30% in production from the beginning of the crop year to September.

Despite the US Department of Agriculture (USDA) reporting a strong price increase in the week, the CFTC report showed paper accounts took the opportunity to realise profits and liquidate their long positions, with the report showing a net closer in speculative long’s for wheat, corn and soybeans. It is worth noting that this could also come as a move away from overbought levels, after net speculative long positions topped a record high for corn and soybeans in September; this latest move perhaps more of a ‘correction’ than a significant sell-move

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Source: Dollar Dominates Commodities After Bernanke Fails to Give Firm QE2 Details