The commodities complex is hugely oversold. US$ bullishness has not been this high since the depths of the financial crisis in early 2009. With the SNB eliminating the synthetic peg to the Euro–Euro bullishness will be revived over the next couple of weeks, as the 41% intraday decline of the Euro against the Swiss franc likely resulted in the short-term capitulation of all remaining Euro bulls. My sense is that the Euro will actually rise if the ECB chooses to adopt QE on January 22nd, as QE would mean the ECB will unconditionally try to keep the European Monetary Union together, which will be bullish for euro-denominated assets, as well as for assets leveraged to the global economy, such as commodities.
We also believe the latest 25 basis point easing by the Reserve Bank of India will be first of many rate cuts this year; China will also follow. With India now the world’s third largest oil importer, any economic acceleration in India will also be felt in the commodities complex.
As such, I believe the commodities space (oil, copper, silver, etc.) will rally hard over the next 2-3 weeks at the very least.