WASDE surprise sends market sharply lower
Head of Commodity Strategy
The report also confirmed a bumper soybean crop which together with Chinese import tariffs are expected to leave a record 845 million bushels in storage by the end of the 2018-19 season. Chicago wheat, meanwhile, was sent lower after the USDA unexpectedly raised Russia’s outlook. This helped lift world ending stocks above what was expected. Cotton also traded lower after production and stocks received a bigger-than-expected boost.
CBOT Soybeans are currently stuck in a tightening range between two trendlines with resistance at $8.50/bu and support at $8.20/bu. In the week to September 4, leveraged funds held a net-short of 63,000 lots which is well below the three-year of a net-long of 45,000 lots. With most of the price-negative news priced in and with US-China trade war showing signs of de-escalating the upside could potentially begin to attract some attention.
CBOT corn has been rangebound since June between $3.4/bu and $3.75/bu. Leveraged funds holds a net-short of 57,000, which is in line with the three-year average.
CBOT Wheat is also caught in a tightening range determined by two trendlines. Support at $4.94/bu which is also the August low while resistance is found at $5.25/bu. The troubled season outside the US helped drive a big jump in the leverage fund long during the past few months. This is currently creating some headwinds while sellers will be looking to trigger long-liquidation on a break below support.
Leveraged funds held an elevated long of 43,000 lots in the week to September 4, close to a six-year high and well above the three-year average of a 70,000-lot net-short.
Latest Market Insights
Q4 Outlook 2022: Winter is coming
- Winter is coming to the financial markets as central banks are tightening their grip. How spring will look is still a question.
European energy crisis: it will get worse before it gets betterThe winter in Europe will be tough, but whether the result is political chaos or sustainable, innovative solutions is still undecided.
A difficult and volatile quarter awaitsAs the year draws to an end, commodities continue to be at centre stage of the world with growth pockets political uncertainty.
The bright side: crises drive innovationThe positive spin on crises is that they come with solutions. It is worrisome that deglobalisation may be a response to this crisis.
Green transformation in China: renewable energy and beyondGoing green, China needs to span numerous energy sources to ensure stability, as every source comes with a challenge.
Asia: Intermittent solutions, but a faster renewable adoption curveAsian energy supply is being squeezed. This and the adoption of renewables may change the investment sentiment in the region.
FX: A Fed thaw needed to deliver a sustained USD turn lowerThe US Dollar can keep momentum when the Federal Reserve continues to tighten, leaving the rest to play to their drum.
Autumn can become ugly for equities and bond holders. Comfort for Dollar longsTechnical analysis suggests that equities could face a tough Q4 as could fixed income. US Dollar positions could provide some upside.
The next stock market sector to watch, with stocks going nuclearAs the world scrambles to find affordable, sustainable energy, nuclear is getting attention from politicians and investors alike.
The crypto space is getting cold when the hype disappearsCryptocurrencies face a winter of their own as retail investors and governments are asking tough questions.