Technical Analyst, Saxo Bank Group
Summary: Also in this analysis report: Range bound Soybeans and Corn
Wheat seems to find support at the 200 daily SMA and in the middle of the Consolidation area, close to the 0.764 retracement at $886.
RSI indicates we could see a last exhaustive move lower possibly to 885-860.
However, if short coverings and bottom fishers can lift Wheat higher next couple and RSI closes above its falling trendline we could see a rebound to resistance at 972. A close above 972, 1,034 is next major resistance.
The collapse in Cotton prices has been the talk of the (Soft Commodity) town past few days. The floor seems to be around the October/November 2021 lows around 103.50. If Cotton can close above 105.31 today it has formed a Bullish Engulfing bottom and reversal candle.
If that scenario plays out, we could see a nice rebound possibly to 117-123.
Out Commodities expert, Ole Hansen explains the reason behind the price collapse in Cotton:
“Cotton, a recession-shy contract, took a major hit last week from raised concerns about an economic slowdown, primarily in China, a major consumer of cotton, but also the wider world as central banks accelerate their efforts to bring down inflation by forcing down activity through higher interest rates. The fiber together with copper are often viewed as gauges for the health of the Chinese and global economy, and recently both have been flashing red alert.
However, after hitting a nine-month low, some 32% below the May peak, the market is showing signs of stabilizing. Driven by a combination of prices hitting deeply oversold levels, the speculative froth being sharply reduced, China softening its strict Covid rules and not least a worsening outlook for US crops after the percentage of crops being rated good to excellent dropped to just 37% versus 52% a year ago. .”
Soybeans still range bound between 1,579 and 1,765. Current bounce off from support around 1,579 is likely to take Soybeans back to around 1,681 i.e. middle of the range.
Corn range bound. 725 and 800 are key levels. RSI is showing negative sentiment indicating we could see test of 725.
Coffee has broken below short-term rising trend line. If breaking below 218 Coffee is likely to drop to around 211 support, possibly down to May lows around 202.
To reverse or neutralize this potential bearish picture a close above 237 is needed.
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach
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