Don’t expect to see any charts of grains, fuels or metals here. Yes, those are commodities and some have been bottoming for some time. But this is about some signs in the foreign exchange market that show that the turn higher may be coming. Forex traders will look at a country and put a label on it’s currency. That label for Australia and Canada is Commodity Currency. Using the Currency Shares Australian Dollar ETF, $FXA, and Currency Shares Canadian Dollar ETF, $FXC, as a proxy for the actual exchange rates there are signs of a turn higher. Take a look.
Currency Shares Australian Dollar ETF, $FXA
The Currency Shares Australian Dollar ETF, $FXA, gapped higher off of a bottom at 97 last week. It has a rising Relative Strength Index (RSI) and a Moving Average Convergence Divergence (MACD) indicator that are rising and bullish and support more upside. This is as the ETF is approaching the gap resistance at 100. A move over 100 is a long entry trigger and brings a target of 104 with some resistance at 102 along the way.
Currency Shares Canadian Dollar ETF, $FXC
The Currency Shares Canadian Dollar ETF, $FXC, is also moving up off of a bottom, this one at 95. The RSI and MACD are trending higher here as well and support a continued move higher in the ETF. At the moment it is creating a symmetrical triangle bounded by the 20 day Simple Moving Average (SMA) to the top with a break out over 97 giving a target of 98.20, filling teh gap from May 17. that would leave the next resistance higher at 99.
If both of these currencies breakout higher many will expect commodities to follow. Get your shopping list ready and be prepared.
*Post courtesy of Greg Harmon at Dragonfly Capital. Harmon CMT, CFA, has traded in the Securities markets since 1986. Read more of his expert analysis here.
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