As with all trading, the secret is identifying the long trends. This is true whether you are an intraday, short term or long-term trader – it is always easier to trade the trend – what ever that direction might be.
For the technical trader, the future being traded generally has no intrinsic interest for them as all factors, all available information, past and present is reflected in price and volume
Even if you do not want to trade futures, the Commodity Research Bureau (CRB) index is a very relevant index for equity players on the Australian market. Not only is it used as a global indicator of world economic health but it also bears a positive correlation to the Australian dollar and in turn resource company share prices.
For those not familiar with the CRB index, it is a measure of price movements of 22 sensitive basic commodities that are accepted as being among the first to be influenced by changes in economic conditions. The 22 commodities are pooled into an "All Commodities" grouping, with two major subdivisions: Raw Industrials, and Foodstuffs. Raw Industrials include burlap, copper scrap, cotton, hides, lead scrap, print cloth, rosin, rubber, steel scrap, tallow, tin, wool tops, and zinc. Foodstuffs include butter, cocoa beans, corn, cottonseed oil, hogs, lard, steers, sugar, and wheat.
Australia is very much an economy dependant on world demand for commodities – wool, wheat metals etc., As demand for Australian products rise then demand for our currency follows. You will note from the overlayed chart below that both started to rise from October last year and have risen in harmony followed by a perfectly coinciding retracement in March.