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Will the US Dollar and Commodity Bull Market Resume?

Barchart - Tue Jan 24, 9:09PM CST
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Most commodities are priced in US Dollars, leading some traders to believe that a strong US Dollar is bearish for commodity prices, while a weak US Dollar is bullish for commodity prices. And there may be times when this is true. But, the seasonal patterns we will discuss will show that these two assets can be correlated over a large sample size of 15-30 years. 

The US Dollar started its significant bull market in March 2021 and culminated in November 2022. As the US Dollar started its bull market, the Goldman Sachs Commodity Index (GSCI) had already been in a bull market since April 2020 and peaked in June 2022. Both assets were in a bull market for multiple years. 

Description and Statistics

The S&P GSCI contains 24 commodities from all commodity sectors: six energy products, five industrial metals, eight agricultural products, three livestock products, and two precious metals. This broad range of constituent commodities provides the S&P GSCI with a high level of diversification.

The US Dollar Index (DXY) measures the value of the US Dollar against six other currencies. When the DXY is in an uptrend, it represents that the US Dollar is more robust against other currencies. Similar to how a stock index has multiple stocks to gauge the overall market strength. 

In an article I wrote for Barchart titled "Crude Oil is Losing Its Viscosity as Traders Slip Away From the Asset," I discussed how the liquidity was drying up in the futures markets as we approached year-end. The graph below illustrates that volume and open interest declined at the CMEGroup exchange as it dropped precipitously from mid-December to the beginning of the year. And now, liquidity is coming back to the CMEGroup. This may be the fuel to relaunch the commodity and DXY bull markets. 

Source: CMEGroup 


Similar to the equity markets, the futures markets have been treading water during the past couple of months. During this time, there have been positive and negative events causing this behavior. 


  • The geopolitical events in Ukraine have not improved
  • The drought in Brazil and Argentina is wreaking havoc on the grain markets
  • The Federal Reserve continues fighting an illusive inflation battle 
  • Supply chain issues continue 


  • An imminent recession awaits the US towards the end of 2023
  • A debt ceiling that could cause a government shut-down
  • The crude oil market is trapped with multiple false price floors because the government states they will replenish the Strategic Petroleum Reserves (SPRs) at lower prices. And if the oil market rallies higher, they threaten to flood the market with more SPR oil. 

Seasonal Patterns 

Moore Research Center, Inc. (MRCI) research reveals a high probability of a significant seasonal low in both the GSCI and DXY arriving soon. Seasonal patterns are not perfect, but they do reflect price patterns that have appeared in the past over a long duration. Traders must use more information to support a buy or sell setup when using seasonal patterns. 

Habits, primarily human, create seasonal patterns. Or in the case of grains, the habits of the planting and harvesting seasons are consistent each year. Regardless, these habits that repeat themselves over 15-30 years should continue until they don't. 

Source: Moore Research Center, Inc. (MRCI) 

MRCI has researched the GSCI and found that seasonal lows generally occur in December or January and peak in May or June. Notice how strong the tendency for prices to rally in February can be. Another interesting point is the seasonal peak and how the market consistently drops until December or January. 

Source: Moore Research Center, Inc. (MRCI) 

Reviewing MRCIs research on the DXY reveals that the seasonal low generally occurs in January or February, while the peak is typically in November. Observe the strength of the moves during February, May, and mid-October to November. These are the times we want to hone in on other analysis techniques and see if these significant moves may appear again this year. 

These two charts illustrate that commodity prices and the DXY have generally been correlated for many years. The two markets could change this pattern any given year due to a fundamental shift in habits for that season. Always confirm your seasonal analysis before placing a trade. 


 Source: Barchart 

From a technical view, the GSCI is following its seasonal patterns well. Last year's seasonal low formed during the seasonal window. The high seasonal pattern unfolded as the market rallied into the June highs. For several months the GSCI has been drifting lower, and as the market arrived at the December and January lows, we saw some buying appear. The December lows will be pivotal and must not be broken if this bull market in commodities is to continue.   

Source: Barchart 

The DXY chart reveals how consistently the seasonal patterns have been working recently. Last year saw the low form during its seasonal window and, soon after, a robust rally to the October-November highs, where the market peaked. Since then, the DXY has been correcting the recent impulse-up move. Currently, the market has approached the low seasonal window. Just like the equity markets are trying to find a bottom to rally from, the GSCI and DXY are also.   


With the liquidity returning to the futures markets after the holiday period, all that is needed is a macro catalyst to move prices. Considering the long duration of the GSCI and DXY price correction, the high demand for commodities, and the FED continuing to raise interest rates, the seasonal pattern could get these markets moving soon. 

Due to the possible longevity of this investment/trade, a trader may consider using Exhange-Traded Funds (ETFs) instead of futures contracts and, for the GSCI, using the Barchart symbol GSG. The vehicle to trade the DXY could be the UUP

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On the date of publication, Don Dawson did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.