Chinese Imports Boost Beans
Soybeans – Beans rallied to new highs on strong Chinese imports of Bean Oil and speculation that domestic production will fall below USDA estimates. Stronger energy prices and a weaker U.S. Dollar also helped lift the market to 19-year highs. China is expected to continue stockpiling imports of Soybeans and related products in an effort to bolster reserves and stave off food inflation. Informa is expecting the 2008 U.S. Bean crop to be around 60 million acres – larger than the 2007 crop, but lower than prior estimates. Beans were down in overnight trading on profit-taking and weakness in energy prices. The Dollar is slightly higher this morning, making exports a bit less attractive. January Beans are technically overbought, with the 9-day RSI registering an 85 percent reading. The overbought levels may leave the market susceptible to further profit-taking. Stochastics are close to crossing over to the downside, which could signal short-term technical weakness. Support comes in at 1052 and 1020, while resistance may be found at 1100.
Copper – Copper had its strongest showing in over two months, jumping almost two cents. There was also speculation that Chilean production may stall due to the 7.7 magnitude quake in the Copper-rich nation. Yesterday's enthusiasm for the base metal has been tempered by a host of factors, including a bleak U.S. economic outlook, record Chinese production and comments by Copper miners that Chile's mines can make up for the lost production in a short period of time. China's domestic production for October jumped 44 percent over last year, which tempered a 10 percent monthly increase in imports. Australian and Indian production also increased over the past month, which could be a drag on prices. The bounce the market has seen over the prior two sessions could also be attributed to technically oversold levels, but the market remains in a downtrend. December Copper has a wall of resistance between 320 and 340 that it must rally through to reverse the current trend. Support comes in at 315.00 and 303.50, while resistance can be found at 340.00 and 358.10
Gold – Gold futures are sharply lower this morning after recovering almost half of their losses over the prior two days. In addition to a stronger greenback, lower global stock prices are putting downside pressure on precious metal and energy prices. Slowing economies could signal lower inflation, making Gold a less attractive investment. The decline in equities may also force traders to liquidate Gold positions to generate cash in their accounts to meet margin calls. After eclipsing the $800 mark, there has been some confusion among traders as to where the next upside target may be. Thousand dollar gold was the talk by some of the more bullish analysts, but traders may have a tough time justifying this type of move in the near-term, as inflation has not yet been shown in U.S. economic data and energy prices have come down from record levels. December Gold is forming a bearish consolation pattern, suggesting further downside is possible. The market did bounce once prices flirted with the 800 area, and the 18-day moving average has acted as support over the past three trading sessions. Momentum has taken a sharp turn downward, but remains bullish at +37.60. Support comes in at 800 and 780, while resistance can be found at the 9-day MA of 817.90 and the high close of 837.50.
Rob Kurzatkowski, Commodity Analyst
