USD is below its 200 Day Moving Average which signifies long term trend. It has broken below major support zone at 98 and moving downwards.
Weakness in US dollar is positive for Copper and Emerging Markets.
Weak US Dollar strengthens copper which is priced in US dollar. Largest Copper Miner Freeport McMoran (FCX) which is a proxy for copper is in a 9.50 – 10.30 resistance zone. This is a confluence of resistance from 2018 lows, 200 day Moving Average and 61.8% retracement of the last major swing. Momentum has broken from a coil and supporting the move upwards.
A pullback from this zone to the support and then a move upwards is expected.
Copper/Gold Ratio has been forming a base below February 1999 lows. After two failed attempts, it has finally managed to break and remain above this level for the past 3 days, supported by momentum.
10 Year Treasury Yield (TNX) has a strong correlation with Copper/Gold Ratio. Rising copper is bullish for yields. 10 Year Treasury Yield (TNX) has been consolidating since late March and now pushing at the resistance zone. Momentum is in bullish territory. Rising copper indicates that the yields may follow the same path.
Weaker US Dollar, rising copper and rising yields are usually bullish for stocks.
Emerging Markets (EEM)
Weakness in US Dollar and bullishness in copper leads us to Emerging Markets.
Copper – Emerging markets and Copper are correlated. Rising copper also means a possibly bullish EEM.
US Dollar – Emerging markets and US Dollar and are inversely correlated. This is due to the fact that emerging market countries have debts denominated in US Dollar. When US Dollar becomes expensive, they have difficulty in paying off these debts which in turn has a negative effect on their economy.
Emerging Markets ETF (EEM) broke above the lows from 2018 with a strong momentum and in the resistance zone its 200 Day Moving Average and 61.8% retracement of last major swing. A pullback to the support and a move upwards is expected.
A weak US Dollar and rising Copper indicates bullishness in EEM.