Commodities have dropped nearly 10 percent in the last couple weeks, as they were due for a much needed breather. The dollar has been strengthening against other foreign currencies and this puts pressure on commodities in general. The long-term picture doesn't support a stronger dollar, but the short-term picture may have the dollar gaining momentum.
We've come to another point where European currencies are weakening with Ireland taking center stage. There is a concern that the debt problems in several European countries could turn into a domino effect. The smaller countries could eventually drag down Spain and possibly Italy after that. The dollar was very oversold and due for a bounce, but the European mess is giving it momentum to move higher.
The strengthening dollar is certainly a headwind for commodity prices. If history holds true, the European mess will be swept under the rug once again and will soon be ignored by investors. Eventually, there will be a day of reckoning when the European mess and more importantly the U.S. debt situation can no longer be ignored. That day will likely be postponed for some time and Wall Street will get back to pushing the markets higher.
I wouldn't be surprised to see commodities gain some strength going into the end of the year. If the correction does continue, there should be some good buying opportunities in commodities in the next couple months. The upside in the dollar should be limited, unless the European mess really explodes.