Among all the breakdowns in historical relationships during 2021, one of the most unusual is that commodities continue to scream higher despite a rising U.S. dollar.
That's not the usual relationship between the two assets. Over the past decade, the two have roughly traveled in opposite directions during big trend swings. A rising dollar has typically meant falling commodities and vice-versa. At least, that was the case until 2021.
Going back to 1975, there have been a dozen instances when the dollar rallied at least 4.5% over a 90-day window, and the Bloomberg Commodity Index more than doubled that return, rallying at least 9%.
Despite a trend that mostly points down over the decades, the dollar tended to rise after these periods, with well-above-average returns.
It was a different sign for commodities. They had a much more difficult time continuing to buck the headwind of a rising dollar.
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The post titled The Link Between Commodities and the Dollar is Broken was originally published as on SentimenTrader.com on 2021-10-15.
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