RBA index of commodity prices: yuck!

Late yesterday the RBA released its August Index of Commodity Prices:

Preliminary estimates for August indicate that the index fell by 3 per cent (on a monthly average basis) in SDR terms, after rising by 0.9 per cent in July (revised). The largest contributors to the fall in August were declines in the prices of iron ore and coking coal. The prices of rural commodities and base metals also declined, however, the prices of oil and gold rose in the month. In Australian dollar terms, the index fell by 4.3 per cent in August.

Over the past year, the index has fallen by 13.7 per cent in SDR terms. Much of this fall has been due to declines in the prices of coking coal and iron ore. The index has fallen by 18.5 per cent in Australian dollar terms over the past year.

The index is in Special Drawing Rights, an IMF’ pseudo currency. More interesting is what it looks like in Australian dollars, which is what matters:

And yes, that is the most perfect head and shoulders pattern I think I’ve ever seen! Which behoves us to take a closer look:

A broken neckline and all. Let’s hope technicals are all hocus pocus because the downside targets suggested by this pattern do not bear thinking about.

Here’s how it all looks year on year, as opposed to simple index:

Which is some way ahead of what was planned for by, well…everyone.

And finally, just for giggles, here’s the index with the cash rate:

With all due reservation, that really is a structural change in interest rates since 2008.