WEAK DOLLAR BOOSTS METAL PRICES -- COPPER REACHES TWO-YEAR HIGH -- CHINA LEADS EMERGING MARKETS HIGHER

DOLLAR INDEX WEAKENS...Chart 1 shows the Invesco Dollar Index (UUP) tumbling today to the lowest level since early September.   And it's losing ground against all of its major trading partners in Europe and Asia.   The weaker dollar has a number of intermarket implications.    One of them is that a weaker dollar tends to boost commodity prices, and metals in particular.   Although precious metals are bouncing today, the stronger action is being seen in base metals which are hitting multi-year highs.    That's especially true of copper.    Another side-effect of a weaker dollar is stronger emerging markets which may be nearing an upside breakout.   China plays a leading role in both stories.

COPPER REACHES TWO-YEAR HIGH...The weekly bars in Chart 2 plotted through yesterday show the price of copper rising to the highest level in more than two years.   It's trading higher again today.    That's having a positive effect on stocks that mine the metal which are also breaking out to the upside.  A lot of that buying is coming from China which is the world's biggest buyer of that commodity.   The fact that the Chinese yuan is also trading at a multi-year high against the dollar is making copper more affordable to Chinese buyers.   Chart 3 shows the Chinese currency rising above its early 2019 peak to reach the highest level since early 2018.   That's helping boost other base metals that are also rising including aluminum, nickel, and tin.  The stronger yuan reflects a stronger Chinese economy which is being reflected in higher stock prices in that country.    All of which is giving a big boost to emerging markets which are being led higher by Asia.   Stronger emerging markets are usually another side effect of a weaker dollar.

EMERGING MARKETS ISHARES TEST OVERHEAD RESISTANCE... The weekly bars in Chart 4 show the MSCI Emerging Markets iShares (EEM) testing overhead resistance formed near the start of the year.   A decisive close above that level would push the EEM to the highest level since early 2018.  Most of those gains are coming from stocks in China, South Korea, and Taiwan.  With China leading the way.

Chart 5 shows the  Deutsche X-Trackers Harvest  CSI 300 China A-Shares ETF (ASHR) already exceeding its early 2018 peak to reach the highest level in five years.    It remains to be seen if a stronger China is enough to give a boost to the global economy.   But it's already giving a big boost to emerging markets.   So is a weaker dollar.