Technical Update - Wheat and Cotton seem to find solid ground after sell off. Coffee on the verge of turning bearish
Kim Cramer Larsson
Technical Analyst, Saxo Bank
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.
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