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While some books (such as Coulson’s An Insider’s Guide to the Mining Sector) focus on one particular commodity this book (Global Mining Investing) attempts (and does well) to cover all types of mining and commodities.

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Monday, January 07, 2008

Commodity based currencies in play

It is in times like these that you want to be trading the commodity based currencies. Why? Because markets are undergoing a change in perceptions - they are adjusting their growth & inflation forecasts. No currencies in these circumstances are better than the A$ - against the USD of course since commodity prices are based in USD. Looking at the charts:
1. AUD-USD: Its apparent from http://finance.yahoo.com/q/bc?s=AUDUSD=X&t=5y&l=on&z=m&q=l&c= that the AUD is at the base of an uptrend. You might legitimately ask - if this the end of the uptrend? I suspect it is not for this reason - base metals are still relatively strong and gold is getting stronger. Indistrial commodities like iron ore and coal are priced on the basis of 1 year annual contracts - those are currently being renegotiated. We might expect some weakness in iron ore & coal, but not alot. But expect delays settling. Looking at a short term price chart, and they are not the best charts, but they are the best I can do on the road - http://finance.yahoo.com/q/bc?s=AUDUSD=X&t=2y&l=on&z=m&q=l&c=. Here we can see that 0.79c looks like the best support for the AUD.
2. CAN-USD: The Canadian dollar is actually fairing alot better than the Australian dollar. The reason for that might be the fact that Canada exports alot of oil to the USA, though Australia also has some advantages. Australia is a bigger gold exporter, and Canada more reliant on base metals. Having said that Australia I think is poorly positioned to retain its status as a large gold producer. The bulk of exploration is moving offshore. The stark reality is that Australian explorers are seeing icey Greenland as more attractive than Australia. It must be a short mining season.... and I would hate to be carrying their heating bill. Pity the investors in that new float. Looking at the 5yr chart - we can see http://finance.yahoo.com/currency/convert?from=CAD&to=USD&amt=1&t=5y that the CAN$ is off its recent highs as oil prices got close to $US100/barrel. Recently they found support at USD parity ($1) http://finance.yahoo.com/currency/convert?from=CAD&to=USD&amt=1&t=1y, and it seems likely that we will see further short term strength in the CAN$, but dont count on it. Whilst oil prices might be strong, I think the broader economic outlook for bae metals will pull down the CAN$. I see weakness down to 95c support.

- Andrew Sheldon www.sheldonthinks.com
Posted by Andrew Sheldon at 5:00 PM
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