The PowerShares DB Agriculture Fund (NYSEArca: DBA) has been a steady, if not overlooked performer among agriculture exchange traded products, but interested investors should pay close attention to DBA’s near-term chart action.
The PowerShares DB Agriculture Fund tries to reflect the performance of the Diversified Agriculture Index Excess Return, which is comprised of futures contracts on the most liquid and widely tracked agriculture commodities.
Supporting the commodities outlook, the China, the world’s top consumer of metals, grains and energy, is seeing its economy stabilize. Moreover, the depreciating U.S. dollar has helped support demand for commodities as an alternative hard asset or a better store of wealth.
The U.S. dollar has previously rallied on expectations for a tighter U.S. monetary policy, which would diminish the amount of dollars sloshing around the economy and prop up the greenback against foreign currencies.[related_stories]
DBA “has made higher lows on its way up from the February 2016 bottom. No surprise, these commodities were helped by stimulating monetary policies around the globe and a drop in the dollar currency basket,” according to TheStreet.com. “Crossing the 200-day moving average was a big hurdle in April, and now that moving average has turned up.”
Commodities have outperformed bonds, currencies and equities this year on speculation over supply disruptions and production cuts that slowly diminished multi-year surpluses, which contributed to the largest price collapse in a generation. Meanwhile, we are also seeing demand improving.
“The moving average convergence divergence (MACD) is currently on a buy signal, and though relative strength has been impressive, we see this ready for some sideways action here,” adds TheStreet on DBA. “That is fine, and turnover has been lower coming off the pennant. After a brief stall and holding the recent lows, we should see DBA start moving higher again, perhaps toward the $30 level later on this year.”
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PowerShares DB Agriculture Fund