Trading Nation

Dollar drop, Syria jitters power commodities bounce

Not convinced by the commodity rally: Pro

Commodities bounced powerfully Tuesday, led by a 4.9 percent rally in crude oil, with many metals and grains coming along for the ride.

This as the U.S. dollar lost a bit of ground in the session, dropping almost 1 percent against the basket of major currencies that makes up the dollar index. A weaker greenback is generally positive for commodity prices, given that it should take more of these less-valuable dollars to buy the same amount of commodities.

For Phillip Streible, senior market strategist at RJO Futures, a technical trend change on the dollar index chart is driving the Tuesday strength.

"With the dollar index punching through the 200-day moving average today, it was a clear catalyst for an across-the-board commodities rally," Streible wrote to CNBC. "From energies, metals, grains and meats we are seeing major moves higher, confirming this change in the dollar's direction is being noticed by traders."

The biggest story, however, is in the oil pits. WTI crude oil futures rose to the highest level in more than a month.

Read More Oil hits month-high on output forecast, OPEC comments

For Stephen Schork, editor of the widely read Schork Report, geopolitical concerns emanating from Russian involvement in the Syrian civil war are behind the recent oil rise.

"While I still think the fundamentals, in terms of demand and supply, point to lower oil prices, this is a big 'What if?' out there, and I don't like being short $45 oil when you've got Russians and Iranians fighting in Syria," Schork said in a Tuesday interview.

To that point, while Schork only sees a few dollars of potential downside for crude, the upside could be huge.

"All you need is one itchy trigger finger in Syria and all bets are off — you could see oil rise to $68 or $70," Schork said.

Read More Could oil prices really shrink to… $20 per barrel?

While Syria itself is a big player in the oil market, Saudi Arabia, Russia and Iran are huge producers, and a worst-case scenario emanating from Syria could potentially impact global supply, boosting prices.

More broadly, for Andrew Burkly of Oppenheimer the action is likely just a short-term relief rally, driven by a weaker dollar and a squeeze in short positions on energy and commodities.

"When we get into earnings season, we know the fundamentals for energy are still pretty poor," he said Tuesday on CNBC's "Power Lunch." "It's going to be very difficult for analysts to be raising their numbers based on the supply and demand dynamics that we see, especially on the energy side of things."

Needless to say, commodities as a whole, and crude oil in particular, have been crushed over the past year. And as of the end of the third quarter, the S&P GSCI total return commodities index was on track for its sixth worst year on record going back to 1970.

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