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Global Macro: Fundamentals, Not Politics, Backing Commodities

NEW YORK (TheStreet) -- U.S. politics have stolen the spotlight, but fundamentals are still backing commodity and commodity currency price patterns.

Oil and the Aussie dollar have traded in volatile ranges over the past few days, due to uncertainty over the debt ceiling in the U.S. Looking further out at a daily chart, however, the price patterns show logical formations.

The first chart below is of United States Oil (USO) . Oil has developed what looks to be a head-and-shoulders reversal formation at yearly highs.

Summer has ended and the Syrian violence premium has all but diminished, as oil struggles to maintain its lofty price levels.

Must Read: Oil Falls Below $107 as Syria Tension Eases

Increased supply sources, such as a new pipeline between Texas and Oklahoma coming to completion, mean that bears may overcome the bulls in oil.

There should be an advance as assets across the board are bid higher when Washington resolves the debt debacle, but don't be surprised if this last push up completes the impending head-and-shoulders reversal pattern.

 

The next chart is of the AUDJPY currency cross. In a slightly different pattern, the price action could prove to be bullish over the next few months.

Although commodities are in jeopardy versus a stronger U.S. dollar, improved global sentiment should push the Aussie dollar higher versus the yen.

Readings from an Australian business confidence report released this week were at yearly highs. The recovery from the 2009 financial crisis has been slow, but ultimately strength has returned to the country.

Investors are pricing in less-than-expected rate cuts from the Reserve Bank of Australia at its next meeting, which lends support to the currency's strength.

 

At the time of publication the author had no position in any of the stocks mentioned.

Follow @AndrewSachais

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Andrew Sachais' focus is on analyzing markets with global macro-based strategies. Sachais is a chief investment strategist and portfolio manager at the start-up fund, Satch Kapital Investments. The fund uses ETF's traded on the U.S. stock market to gain exposure to both domestic and foreign assets. His strategy takes into consideration global equity, commodity, currency and debt markets. Sachais is a graduate of Georgetown University, where he earned a degree in Economics.

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