[ForexNews]

Equity markets have remained resilient bouncing off early lows showing that liquidity continues ruling markets. Savings, term deposits and not invested cash by mutual accounts are still far above long-term average levels suggesting that the share market will press higher unless there is a fundamental change taking place. Lower Chinese shares are regarded as a local event and as long as China’s equity market weakness does not spill over into commodity markets global shares will continue to rally. However, commodity inventory levels are high and the raw materials are all showing signs of speculative excesses. For instance, natural gas prices have declined and diverged from oil and coal prices. There is one simple reason for this divergence. It is expensive storing natural gas relative to oil and coal. Hence, the divergence of the natural gas versus other energy products might express the degree of speculation
in commodities. Once this bubble bursts the impact currency markets will be significant leading to USD
strength.