A bit of inflation relief on lower than expected wholesale and consumer prices helped continue a near term shift in the selling the dollar/buying commodities arbitrage trade. How long will it continue?
The lower inflation data gives the Fed more time to stimulate the economy before it will need to raise interest rates. Traders realizing this, began taking profits, helping the dollar to rebound.
RBOB futures led the energy complex lower this past week. Gas inventories showed a greater than expected build leading to a sell off below $2.00 support. Traders will be watching crude's support at $69. Should it give way, we will likely see a further pull back in the complex.
Traders will also be closely watching this week's inventories looking for another large build in gas. RBOB will receive some support for falling prices by the 4th of July driving patterns and as we enter further into the hurricane season. The Iranian protests have the potential to drive the complex higher should the Iranian government increase aggression.
Inflation will eventually take hold in the US. The beginning of price increases has been temporarily delayed. Longer term traders will be looking to take this temporary pull back to put the US$/commodities arb positions back on.
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