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April 2015 Archives

April 1, 2015

"No Foolin" Record U.S. Soybean Acreage Expected in 2015

Wednesday, April 1, 2015

The following are the highlights from the USDA March 1 Quarterly Grain Stocks and 2015 Planting Intentions Reports:
U.S. Grain Stocks (March 1) Planting Acreage Estimate
Corn: 7.745 billion bu. 89.2 million acres
Soybeans: 1.334 billion bu. 84.6 million acres
Wheat: 1.124 billion bu. 55.4 million acres

Fundamentals

U.S. producers are expected to plant a record amount of Soybeans this season according to the USDA. In the usually highly anticipated Prospective Plantings report that was released on Tuesday, the USDA estimated U.S. Soybean plantings at 84.635 million acres which was above the 83.701 acres planted last year. However, New-crop Soybean prices actually rallied following the report as traders were expecting an even larger amount of acreage for Soybeans this season. Old-crop Soybean inventories as of March 1 were 1.334 billion bushels, up sharply from 2014 when inventories stood at 994 million bushels. However, analysts were expecting even larger supplies of Soybeans in the bins, which allowed the May contract to rally sharply off session lows. The report triggered sharp intra-day price volatility with both the May and November contracts, trading in an over 30-cent price range in the minutes following the data release. Spread traders saw the old-crop/new-crop Soybean spread widen slightly with the old-crop May futures trading slightly above a 20-cent premium to the new-crop November futures as of this writing vs. a 19-cent May premium on Monday.

Technical Notes

Looking at the daily chart for November Soybeans we notice the large price swing that occurred on Tuesday, following the release of the USDA Prospective Planting report. In particular we should note that prices did attempt a test of the 20-day moving average on Tuesday, but prices ended up closing below this key technical indicator on Tuesday. The 14-day RSI has turned upward, but is still reading a rather weak 43.99. The next major resistance level is seen at the March 2 high of 1004.75, with support found at the September 29 low at 927.50.

Mike Zarembski, Senior Commodity Analyst

April 3, 2015

Stimulus Hopes, Greenback Stabilize Copper

Friday, April 3, 2015

Copper prices have been steadily climbing since making a relative low in late January, bolstered by expectations of further expansionary policies from the Peoples' Bank of China (PBOC). Chinese economic activity has been lackluster, at best, pressured by natural headwinds and economic reforms. Reforms and a crackdown on corruption has impacted various facets of the Chinese economy, most notably raw material purchases. The fallout from the Qingdao Copper scandal is still hanging in the air, which has been somewhat negative for the Copper market.

Fundamentals

Traders have been concerned over China's demand, or lack thereof, over the past couple of years now. Even though Copper consumption growth has slowed to its lowest level in 5 years, it still grew 0.7% in Q1. Even though Copper demand did manage modest growth this quarter, the Chinese housing market's slowdown may continue to be a cause for concern for traders. As previously alluded to, the Qingdao Copper scandal has resulted in banks being reluctant to offer letters of credit to buy Copper, resulting in larger inventories. There has also been tighter controls on shadow banking, making it more difficult to secure near-term financing. Shanghai inventories have more than doubled over the past year to 224,000 metric tons. LME stocks have also more than doubled since the beginning of 2014, indicating lackluster demand. LME inventories did see destocking for the fifth straight day and LME stocks have seen a drawdown in 8 of the past 11 sessions. In the near-term, this can be seen as positive, as can the recent stagnation in the US Dollar Index. The greenback had been one of the key pressure points for the Copper market, but the Dollar Index has been unable to break the 100 level to this point.

Technical Notes

Turning to the continuous chart, we see the Copper contract making some positive strides since prices hit a relative low in late January. Prices have broken and maintained the 20- and 50-day moving averages, suggesting that a near-term low may be in place. Prices did break the 100-day SMA as well, but were unable to hold above the average. Prices were also unable to break through near-term resistance at the 2.85 level. If prices managed to break through 2.85, Copper prices could eventually settle into the low 3.00's, which was a where Copper spent a good chuck of 2014.

Rob Kurzatkowski, Senior Commodity Analyst

April 6, 2015

Swing and a Miss

Monday, April 6, 2015

The employment picture apparently got a bit brighter for those looking for work, as weekly initial jobless claims fell by a larger than expected 20,000 to a seasonally adjusted 268,000 for the reporting period ending March 28th. The less volatile 4-week moving average of jobless claims also fell by 14,750 to 285,500. It appears that the jobless picture might be running counter to recent economic and now payrolls data, that U.S. economic growth is slowing.

Fundamentals

With the start of baseball season just around the corner, it appears traders and economists already struck out when trying to predict the headline figure from Friday's Non-farm Payrolls Report. Traders were expecting a bit of a slowdown in jobs creation last month, with the consensus estimate calling for 250,000 jobs being created. This is down from the originally reported 295,000 jobs created in February, although the unemployment rate was expected to remain steady at 5.5%. Well, I guess batting .500 is not too bad, as the Labor Department announced only 126,000 jobs were created in March! This was nearly half of what was anticipated and to make matters worse, the employment totals for January and February were revised lower by 69,000. The unemployment rate did remain steady at 5.5%. The ADP National Employment Report, which focuses on the private sector, stated that 189,000 jobs were created last month, which also was below expectations but nowhere near the disappointment of Friday's report. While the payrolls data had been a pleasant surprise up to this month's clunker, the one figure that may be keeping the Federal Reserve in check and delaying a rise in interest rates has been the slow growth in wages. Here we saw average hourly earnings rise by 0.3%, which was slightly above the estimate for a 0.2% rise. However, the average hourly work week fell by 0.1 to 34.5 hours. With only limited trading on Friday, traders should prepare for a "Manic Monday" when market participants return from the holiday weekend.

Technical Notes

Looking at the daily continuation chart for the E-mini S&P 500 futures, we notice prices have moved below the uptrend line drawn from the October 2014 low. In a sense, the market is in a "no-man's land," trading below the 20-day moving average and above the 200-day moving average. Even the 14-day RSI is not favoring either side of the market, with a current reading of 46.84. The March 26th low of 2033.25 looks to be near-term support for the June futures, with resistance found at the March 18th high of 2107.75.

Mike Zarembski, Senior Commodity Analyst

April 7, 2015

Currency Traders Focus on Tomorrow's FOMC Minutes

Tuesday, April 7, 2015

The US Dollar Index continues to trade in a sideways pattern on the daily chart, largely due to lackluster economic data and signs that the Fed has pushed back their timeline on rate hikes. Currency traders were really banking on rate increases, which has resulted in the grind we have seen in the greenback since mid-March. Traders are anxiously awaiting the FOMC minutes slated to be released tomorrow afternoon to give more insight into the central bank's internal discussion over rate hikes. Also, the minutes will give traders a better idea as to what data the Fed is zeroing in on to determine whether an increase in interest rates is warranted. Today's and tomorrow's price action could be choppy and traders probably should not read much into it.

Fundamentals

The US Dollar has faced some headwinds from poor jobs data, which may result in the Fed pushing their timetable on rate hikes back a little bit. Non-farm payrolls for March disappointed, tallying a 126,000 increase versus the estimate of 245,000. The silver lining in the report is that wages did increase a little bit. While some traders are concerned that this could be the start of a pattern of weaker job growth, many expect March's weak job creation to be a one-off event. The economy could bounce back from the cold weather and West Coast port strikes, which affect more jobs than simply at the ports. At the same time, European economic data has slightly surprised, which may improve the outlook for the Euro currency. The recent inflation report showed deflation decreasing, suggesting the ECB's quantitative easing program may have a smaller scope than previously expected. While consumers certainly have reaped the rewards of a stronger greenback in the form of cheaper fuel and more expendable income, multinational companies may not fare as well. The stronger currency has made exports a bit more expensive and may have a negative effect on corporate profits. This also could have a negative impact on the job market if multinationals freeze new hires or lay workers off as a result.

Technical Notes

Turning to the chart, we see the March Dollar Index trading in a triangle/wedge pattern since March. Given the preceding move higher, this could have a slight upside bias for a possible breakout. Recent price action has resulted in the March contract falling below the 20-day moving average, suggesting a near-term high may be in place. Prices have tested and initially held the 50-day moving average.

Rob Kurzatkowski, Senior Commodity Analyst


April 9, 2015

Unexpectedly Hawkish FOMC Minutes Weigh on Gold

Thursday, April 9, 2015

Gold futures fell after the release of the FOMC minutes, which showed committee members split on the timetable for interest rate increases. Several Fed participants went on record saying that they expected economic metrics to warrant interest rate hikes as early as June. June was the original timetable many traders believed rates would be increased, before the March policy statement and subsequent statements from Fed Chairwoman Janet Yellen. The March policy statement was a bit more dovish than traders expected, but the minutes paint a different picture. This could be seen as Dollar positive and potentially negative for Gold prices.

Fundamentals

While the FOMC minutes were certainly viewed negatively by Gold traders, the metal is facing more pressure on the demand side. Physical demand from China, the world's second largest consumer, has been very soft. There are simply too many other investment vehicles and Gold's prospects do not look that enticing. Chinese equity prices have moved higher at a torrid pace and bond futures have recently become available in the country and can be seen as attractive, given the high likelihood that the People's Bank of China will continue to inject liquidity. The deciding factor for Gold's direction may be the US Dollar. Yesterday's release of the FOMC minutes could embolden Dollar bulls and lead to the Dollar Index breaking and sustaining gains above the 100 mark. If this happens, Gold may continue to face downward pressure with occasional event driven buying from geopolitical events or Greece.

Technical Notes

Turning to the chart, we see the continuous Gold contract trading above the 1200 level for several sessions, before falling back in early trading this morning. Prices also broke and failed to hold the 50- and 100-day moving averages. The RSI indicator had previously given overbought readings, which could account for some of the recent weakness.

Rob Kurzatkowski, Senior Commodity Analyst

April 10, 2015

"Red" Across the Board Following USDA Report

Friday, April 10, 2015

The following are the highlights from the USDA Supply/Demand report for April

U.S. Inventories 2014-15 U.S. Inventories 2013-14

Corn: 1.827 billion bu 1.232 billion bu

Soybeans: 0.370 billion bu 0.092 billion bu

Wheat: 0.684 billion bu 0.590 billion bu

Fundamentals

Another Thursday, another crop report. This time the USDA released its April estimate for U.S. and global grain inventories, as well as production data from South America. U.S. inventories for Corn, Soybeans and Wheat came in slightly lower than pre-report estimates, with the largest decline seen in Corn. However, current U.S. grain inventories are still well above year ago levels, which helped to damper bullish enthusiasm among traders. Globally, grain stockpiles were above estimates, aided by larger production totals for both Corn and Soybeans out of Argentina, which is the second largest South American grain producer behind Brazil. While analysts noted there were few "surprises" in the USDA report, the real concern among market participants is whether global demand will be high enough to absorb what could potentially be another record for U.S. grain production on top of rising global inventories.

Technical Notes

Looking at the daily chart for May Soybeans, we notice prices drifting lower as the market has made a series of lower highs and slightly lower lows for the past 6 months, with the 950.00 level acting as solid support so far. Prices are currently below both the 20- and 200-day moving averages, and the 14-day RSI has turned weak, but has held above oversold levels with a current reading of 37.26. As we noted earlier, 950.00 appears to be solid support for the May futures, with resistance seen at 993.00.

Mike Zarembski, Senior Commodity Analyst

April 13, 2015

Choppy Waters Ahead for Japanese Yen

Monday, April 13, 2015

The Japanese Yen has settled into a very narrow trading range after several periods of volatility over the past few years. The Japanese economy has vacillated between expansion and recession over the past several years. Japan's GDP is growing again, although slowly, after the sharp recession in early 2014 induced by a sales tax increase in April 2014.

Fundamentals

In the 4th quarter of 2014, Japan's economy grew at an annualized rate of 1.5%. This was revised down from the initial reading of 2.2%. The recent drop in Crude Oil prices should benefit Japan, as they are a net importer of Oil. Also, a second sales tax increase has been postponed until at least April 2017. Japanese interest rates have been at 0 since October 2010, and the Bank of Japan introduced a massive stimulus in an October 2014 announcement.

The Japanese Yen reacted quickly to the October news, dropping on October 31st from an open of .9154 to close at .8908. Since then, however, trading has been quite range bound, perhaps indicating indecision about the future health of Japan's economy.

Technical Notes

Looking at the 3-month chart, we can see a fairly narrow trading range over the past 2 months. Support is seen around .8250, while resistance is around .8460. The 14-day RSI is at 47, indicating a short-term bullish trend after the reversal on March 10th.

Dale Jennings, Commodity Analyst

April 14, 2015

Russia Ends Rocket System Ban, Propels Oil

Tuesday, April 14, 2015

Crude Oil futures are higher in early trading this morning, boosted by an Oil-for-goods swap agreement reportedly signed between Russia and Iran. Coincidentally, or maybe not, Russian President Vladimir Putin signed a decree ending the country's self-imposed ban on delivery of the S-300 anti-missile rocket system to Iran. This comes after world powers, including the US and Russia, came to an interim deal with Iran to scale back the nation's nuclear program. This has certainly escalated some traders' fears, although Russia has shot down the idea that it will be going through with the delivery of the system.

Fundamentals

Crude Oil futures are also higher on expectations that US Crude Oil production growth will finally slow. Not only could production fall, but the drop-off in production could be very substantial. As Crude Oil production kept tumbling, rig counts kept dropping off at a feverish pace. The number of Oil rigs in use fell to 760 last week, down 53% percent of the October peak. There can be a delay of half a year to a year between when a well is drilled and when it actually begins to pump Oil. This makes analyzing just rig counts and capital expenditures by Oil companies a misleading indicator. That being said, traders banking on production dropping sharply this year could be disappointed. The full effect of the drop-off in Oil rigs may not be felt until well into 2016. We could very well continue to see a glut in Oil supplies for the foreseeable future due to drilled out wells continuing to produce Oil and lackluster demand.

Technical Notes

Turning to the continuous chart, we see the June Crude Oil contract trading above the 54.10 resistance level in early trading. If the contract is able to maintain the level, it could signal the beginning of a possible breakout from the 42-54 trading range. Prices are also above the 100-day moving average in early trading. The RSI indicator is showing Crude Oil near overbought levels, which could provide some headwinds for prices.

Rob Kurzatkowski, Senior Commodity Analyst

April 15, 2015

Drillers Finally Plugging the Oil Price Leak?

Wednesday, April 15, 2015

The possibility of economic sanctions being lifted from Iran from a prospective deal on its nuclear program was initially deemed bearish for Oil prices, as Iran would once again be able to return to the global Oil export market. However, economists from the International Energy Agency (IEA) believe it may take years for Iranian Oil exports to make a significant impact on global supplies given its needs to improve and modernize its infrastructure that was stymied due to the Western economic sanctions that have been in place since 2010.

Fundamentals

Oil prices have traded sideways for most of 2015, following the steep price drop that took prices to lows not seen since the depths of the financial crisis back in 2009. The decline in prices to the upper 40's and lower 50's has forced U.S. Oil producers to reduce the number of rigs used for drilling by over 50% from its highest levels seen in the 4th quarter of 2014. However, Oil production has yet to show any meaningful decline so far, as producers have kept the most productive wells in play, and have focused on curtailing only the higher priced and less productive wells so far. In addition, moderate demand and continued near-record domestic production has allowed the amount of Oil storage levels to soar especially at Cushing, Oklahoma, which is the delivery point for the NYMEX WTI futures. Last week, the Energy Information Administration reported that Oil inventories in Cushing rose by just over 1.2 million barrels to 60.175 million barrels. To put this into perspective, last year at this time, Oil storage at Cushing totaled only 27.5 million barrels. However, the Energy Information Administration reported on Monday that production from 7 key shale producing regions of the U.S. will decline by 57,000 barrels per day in May vs. what is expected in April.

Technical Notes

This morning we are going to turn our technical focus to the calendar spreads for Crude Oil and specifically the June 2015 vs. the December 2015 spread. Here we notice while the market remains in a contango, a situation in the term structure of futures prices where prices for deferred delivery are priced higher than for nearby delivery, the price for the June futures is starting to gain on the December contract with the spread narrowing by over 2 dollars the past 4 weeks, which could be a signal of improving demand. Prices have now moved above the 20-day moving average and the 14-day RSI has turned positive with a current reading of 61.18. We notice some modest resistance at 3.20 December premium with some solid resistance found at 2.00 December premium. Support is seen at a 6.20 December premium.

Mike Zarembski, Senior Commodity Analyst

April 16, 2015

Is It Time for the Aussie to Turn?

Thursday, April 16, 2015

The Australian Dollar continues to slide, but the downtrend has begun to slow since February. Traders have begun to take notice of the relative stability in the currency and are asking themselves if this is a sign that the currency is bottoming. There are still a number of internal and external forces working against the Aussie Dollar, but the Reserve Bank of Australia has found itself in the crosshairs of critics, who support a stronger currency. There is pressure to not let the currency fall to 70 cents on the US Dollar, which could slow rate cuts or could even result in the central bank doing a full 180 degree turn and raising rates to stabilize the currency.

Fundamentals

For many years, the Australian Dollar was the beneficiary of its role as one of the main exporters of natural resources to China. The Australian economy was able to weather the storm of both the US and EU banking crises due to the relationship. However, Chinese economic growth has fallen to 7.0% in Q1 of this year, falling 5% since 2010. In theory, the fact that Australia is an export heavy economy, it should benefit from the weakening of the currency. However, things have not worked out that way, as China itself has had troubles with exports. Chinese exports fell 15% in the month of March, while forecasters had been looking for an increase of 12% for the month. Chinese exports were also down 12.7% from March of last year. The weakness of the export market has negatively impacted employment, which has actually seen a bit of a rebound. Historically speaking, the unemployment rate in Australia is above norms, currently sitting at 6.1% in the most recent report. That is down from 6.3% the month prior, but remains extremely vulnerable. The weakness in commodity prices and anemic Chinese exports could hit employment in the mining sector. The RBA is expected to cut interest rates at least one more time this year, which could further pressure the currency against the greenback.

Technical Notes

Turning to the continuous Australian Dollar chart, we see the currency managing to hold above the 0.7500 level. The Aussies has tested the low 0.7500's several times, but has rebounded each time. If the currency is to stabilize or reverse, it is imperative that 0.7500 is held. Prices are above the 20- and 50-day moving averages this morning. If the Aussie is able to hold here, it could gain some traction. On the upside, a move above the 0.8000 mark could be a huge boost to near-term momentum for the currency.

Rob Kurzatkowski, Senior Commodity Analyst

April 17, 2015

Sowing the Seeds of a Bull Market for Cotton?

Friday, April 17, 2015

A quick look at the most recent Commitment of Traders report shows non-commercial traders becoming increasingly bullish on Cotton after adding over 7,000 new net-long positions for the reporting period ending 4/7/2015. This has sent the overall net-long position for large speculators to nearly 44,000 contracts. Non-reportable traders are also increasing their net long positions with over 3,700 new net-long positons added. Commercial traders are on the other side of the trade with over 10,000 new net-short positions added.

Fundamentals

After 4 years of sharply lower prices, U.S. Cotton producers may have finally got the message and are curtailing planted acreage this season to the lowest levels in 6 years. In its U.S. planting intentions report release last month, the USDA estimates 9.549 million acres will be utilized for Cotton production this year, which is down 13% from a year ago. In addition, Cotton planting in the state of Texas, the largest Cotton producing state in the U.S., are expected to fall to just over 5.71 million acres this season, which would be a reduction of about 8% from last year. While U.S. Cotton production is expected to fall, traders appear to be hesitant to become overly bullish on Cotton prices until the demand side of the equations can be quantified. First, Cotton bulls have to deal with huge global Cotton stockpiles, especially in China, which is the largest consumer of the fiber. China is believed to be holding well over 50% of the global Cotton stockpile and how it decides to handle its reserves this season could be the determinant to the ultimate direction for Cotton prices in 2015.
Technical Notes

Looking at the daily chart for July Cotton, we notice that since the contract low was made back in January, the market has made a series of higher lows and higher highs. Prices are currently hovering just above both the 20 and 200-day moving averages (MA), and it appears that the 20-day MA is poised to cross above the 200-day MA, which is generally viewed as a bullish indicator. The 14-day RSI has moved to a neutral stance with a current reading of 53.72. 66.70 is seen as the next resistance level for the July contract, with support found at 62.58.

Mike Zarembski, Senior Commodity Analyst


April 20, 2015

Silver Tarnished after Recent Rally

Monday, April 20, 2015

Every April, Silver traders remember the extreme volatility in April of 2011. In early 2011, Silver prices were on a meteoric tear, quickly rising from the mid-$20 range all the way up to near $50. In late April, however, the Silver market was met with a sharp 30% correction. The Silver market is much smaller than the Gold market, and this smaller size tends to exacerbate the extreme price movements that are possible in precious metals markets.

Fundamentals

Although Silver has been in a long-term bear market, there was a brief rally after the March FOMC meeting. This rally proved to be very short-lived, and Silver prices pulled back quickly from the March 26th high of 17.325. Silver prices tend to be inversely correlated with the strength of the US dollar. The US dollar has been choppy over the past month, as traders try to balance economic reports, inflation expectations, and anticipations of Fed rate increases. An improving global economy could help spur an increase in the physical demand for Silver, but price increases may be tempered by a strong dollar as well as lackluster speculation interest.

Technical Notes

Looking at the continuation chart, there is a pattern of Silver making lower highs with each attempt at a rally. The mid-March closes around 15.5 provide support, while short-term resistance can be found around 17.35. Silver is also currently trading below the 20-day simple moving average, which is a bearish indicator, and the 14-day RSI is at 42, which is neutral.

Dale Jennings, Commodity Analyst

April 21, 2015

Consumer Optimism Reigns, but Earnings Doubts

Tuesday, April 21, 2015

Stock futures are higher this morning, boosted by renewed optimism in the US economy. According to a poll conducted by CNN/ORC, public confidence in the US economy is at its highest level in more than 7 ½ years. This comes on the heels of Friday's Michigan consumer sentiment index, which was at its second highest level in more than 8 years. Companies are hoping that this consumer optimism leads to consumer spending. Global equity index futures have been somewhat tempered by lingering concerns over the Greek debt situation. There also have been a number of high profile investors who have voiced concerns over corporate profits, which has led to some sluggishness in prices.

Fundamentals

S&P futures continue to trade near all-time highs, boosted by optimism from both consumers and the corporate sector. Globally, Central Bank easing continues to reign supreme. The European Central Bank and Bank of Japan maintain aggressive quantitative easing ("QE"), which could help stimulate growth. Japanese Prime Minister Abe hinted at more QE. Even countries that are not going the aggressive QE route maintain low interest rates, which could go lower. The US economy and, by extension, corporate profits could benefit greatly from the rest of the world righting the ship. The remainder of the earnings seasons will likely have the greatest impact on the market over the medium-term. Long-term, there is some concern that corporate profits may have peaked. Productivity has climbed, as firms cut labor costs faster than output. This led to improved profit margins and earnings. Now that companies have begun to hire again, we could see the productivity bubble bursting. This could actually lead to corporate profits plateauing, or possibly shrinking this year unless demand for goods outweighs this likely reversal in productivity.

Technical Notes

Turning to the chart, we see the June E-mini S&P trading near the 2100 level in early trading. In order to capture some meaningful momentum, prices will have to break through recent highs at 2113.75 in convincing fashion. Otherwise, prices could remain in a rut, or possibly break down and test sub-2000 levels.

Rob Kurzatkowski, Senior Commodity Analyst

April 22, 2015

Bulls Losing their Cocoa Cravings?

Wednesday, April 22, 2015

Here are the results from the first quarter Cocoa grindings report for North America and Europe:

Q1 2015 Q1 2014 Percentage change
North America: 121,508 mt 129,007 mt -5.81%
Europe: 337,706 mt 343,062 mt -1.60%
Fundamentals

Cocoa bulls appear to be losing their chocolate cravings, as prices have fallen over $700 per ton the past 6 months. The latest bearish news came from the National Confectioners Association which released their report on first quarter North American Cocoa grindings last week. The report showed Cocoa processors' grindings fell to 121,508 metric tons (mt) in the first quarter of 2015, vs. 129,007 mt in the first quarter of 2014. This was 5.8% lower year-over-year and the lowest grinding totals since 2012. While European Cocoa grindings were better than anticipated at 337,706 mt, the total was still down 1.6% from year ago levels. Amongst the headwinds seen for Cocoa prices and commodities in general is the strength in the U.S. dollar, which makes commodities more expensive for non-dollar users. As we move further into the second quarter, traders will turn some of their focus to crop conditions in West Africa and, in particular, the Ivory Coast, which is the largest Cocoa producing nation. Recent rainfall there has helped to elevate some of the concerns of the hot and dry conditions that had plagued parts of West Africa earlier this season. The wild card this season may come from Ghana, where analysts are puzzled by a discrepancy in the estimate for this season's production from the nation's industry regulator, Cocobod, and private forecasters. Cocoabod has this year's harvest totaling 850,000 mt, while private forecasters are looking for production to fall to around 750,000 mt due to disease and a reduction in government support for producers. Depending on where actual production falls, this could be the difference from a market being adequately supplied and a Cocoa deficit for the 2014-15 season.

Technical Notes

Looking at the weekly continuation chart for Cocoa, we notice that the uptrend line that was drawn from the March 2013 low has been broken to the downside. Currently prices are sandwiched between the 20- and 200-week moving averages, and the 14-week RSI has started to turn lower, with a current reading of 43.01. Some technicians may argue that the recent price decline is actually a bull flag formation, but we would need to see a close above the recent high at 3116 to confirm the bullish technical pattern. 2669 is seen as the next support level for the July futures, with resistance seen at 3116.

Mike Zarembski, Senior Commodity Analyst

April 23, 2015

Economic Optimism Causes Headwinds for Bonds

Thursday, April 23, 2015

Bond futures are slightly higher this morning, after suffering three consecutive days of setbacks. Consumer optimism and strength in equity prices has weighed on the defensive appeal of the treasury market. The stagnation in the US Dollar has also not helped Bond prices, as it could stop attracting foreign investment. However, the Greek situation could pressure German Bonds and possibly add a downside buffer to US treasuries.

Fundamentals

The Michigan Consumer Sentiment Index, along with several other sentiment indicators, have posted their highest readings in multiple years. Existing home sales have also posted their best reading in a year and a half. These positive economic indicators have raised the risk of the Federal Reserve raising interest rates. This earnings seasons has a trend of better than expected earnings, but revenues have been disappointing. Earlier in the cycle, it seemed that traders were focused on the negative of revenues missing targets, but the focus seems to have shifted toward the positive of earnings coming in better than expected. Not all is rosy for the US economy. The US economy added only 126,000 jobs in March after adding more than 200,000 jobs in January and February. GDP growth and retail sales have also been lackluster at best, which could delay a possible rate hike.

Technical Notes

Turning to the chart, we see the June Bond trading in a tight range near the 165-00 level. Yesterday's down day resulted in prices slipping out of this range and trading below the 50-day moving average, which can be seen as negative in the near-term. Prices may test the 159-00 level on the downside. If prices are not able to hold 159, the June Bond contract could test the 155-00 level.

Rob Kurzatkowski, Senior Commodity Analyst

April 24, 2015

Consumers Love their Morning Java

Friday, April 24, 2015

Large speculators have become bearish on the prospects for Coffee prices of late according to the Commitment of Trader's report. For the reporting period ending April 14, non-commercial traders added just over 5,400 new net-short positions during the reporting period. On the other side of the trade were commercial participants who are now net-long just over 3,500 contracts, after adding about 5,300 new net-long positions. Small speculators remain net-long with a net position of 2,042 contracts.

Fundamentals

Though having a slight bias due to the name of this newsletter, I must say that Coffee consumption has seen a revival worldwide with demand for this traditional morning pick- me-up has moved to record levels. The International Coffee Organization (ICO) has forecasted 2014 global demand at 149.27 million 60kg bags. This was 2.3% higher from the previous year, as growing demand from emerging markets contributed to the robust demand last year. Concurrent with rising demand, Coffee production is expected to have fallen to 141.85 million 60kg bags on reduced production estimates from Africa. The ICO now expects a 2014-15 Coffee deficit of between 7.4 and 8 million bags. In the coming weeks, Coffee traders will be keenly focused on production reports out of Brazil, the world's leading Coffee producing nation. In particular, market participants will be watching if drought conditions early in 2014 have had a material effect on this season production, as Coffee trees may not have fully recovered from the stress of hot and dry weather.

Technical Notes

Looking at the weekly continuation chart for Coffee futures, we notice prices in the midst of a downtrend, with prices declining nearly one dollar per pound from the recent high made back in October 2014. Recently prices appear to be attempting to consolidate between 125.00 and 150.00 with the 14-day RSI rebounding from near-oversold levels to a more neutral reading of 42.07. Resistance is seen at the recent high of 147.35, with support found at the March 9 low of 126.45.

Mike Zarembski, Senior Commodity Analyst

April 27, 2015

Loonie taking off in the Great White North

Monday, April 27, 2015

The Canadian dollar slid early this year, as the sharp decline in oil prices in late 2014 caused the Bank of Canada to cut rates by 25 basis points in January. As oil prices have rebounded, the Canadian dollar has bounced back off the March lows. The stabilization in oil prices should be a boon to the Canadian economy.

Fundamentals

The Canadian dollar was trading near parity with the US dollar as recently as May of 2013. Since then, the Canadian dollar has been weakening, with a sharp drop in January of 2015 after the Bank of Canada announced a surprise rate cut on January 21, 2015 from 1% down to .75%. It is quite unusual for a major central bank to make rate cuts without preciously indicating their intentions. The result of this cut shocked the market, as the Canadian dollar traded in an extremely wide range that day, from a high of .8279 to a low of .8063. Many investors were nervous about the possibility of a second rate cut, but the recent strengthening in the Loonie as well as comments from Stephen Poloz, a Bank of Canada Governor, indicate that a second rate cut is not currently on the table.

Technical Notes

Looking at the daily 6-month continuation chart, the Canadian dollar is now trading above both the 50- and 20-day simple moving averages, indicating a bullish trend. The 20-day simple moving average recently crossed above the 50-day simple moving average, another bullish trend. Support can be found at the .7804 recent low, and resistance at .8260. The 14-day RSI is quite bullish at 66.27, nearing overbought territory.

Dale Jennings, Commodity Analyst


April 29, 2015

Copper Bulls Bend but Don't Break

Wednesday, April 29, 2015

Copper inventories in Shanghai Futures Exchange warehouses fell to their lowest levels since February following a nearly 10% decline in the past week. At the London Metal Exchange (LME) Copper inventories were holding steady at just under 338,000 metric tons.

Fundamentals

The recent correction in the U.S. Dollar bull market has renewed traders' buying interest in Copper, as the "red metal" has had a slow but rather choppy price rise of late. While the weakening "greenback" has been the main catalyst for the increase in commodity prices, Copper also has benefitted from expectations of increased stimulus out of China, as well as a rebound in prices of other industrial commodities such as Nickel, Zinc and Iron Ore. With China accounting for nearly half the world's consumption of Copper, any signs of increased demand from the world's most populous nation can have an outside effect on commodity prices and, in particular, Copper. While there have been some reports that short-covering buying has been behind the price recovery, a look at the Commitment of Traders report last week shows non-reportable traders (small speculators) doing the short-covering buying, as their overall net-short position fell by nearly 4,500 contracts. On the other side of the trade, non-commercial traders (large speculators) were adding to existing short positions, with an additional 5,092 new net-short positions added during the reporting period ending on April 21.

Technical Notes

Looking at the daily continuation chart for Copper futures, we notice the market has been in an uptrend following a major low made back in late January at 2.4200. Since that time, we have seen prices rally to as high as 2.9240 before selling pressure emerged. The recent market movement seen since mid-March could be construed as a bull flag technical formation. With prices currently hovering above the 20-day moving average but below the longer-term 200-day moving average, it is no surprise that momentum as measured by the 14-day RSI is rather neutral, with a current reading of 54.85. 2.8295 is seen as the next resistance level for July Copper with support found at 2.6475.

Michael Zarembski, Senior Commodity Analyst

April 30, 2015

Fed, GDP Snap Dollar Out of Its Range

Thursday, April 30, 2015

The Dollar Index has started off the week on a sour note, extending losses from the latter half of last week, with the FOMC rate decision/policy statement and GDP figures providing additional fuel to the bearish fire. As expected, the Fed will continue leave rates unchanged, but the policy statement did not rule out an interest increase later this year. Recent policy statements from the Committee have been very inconsistent, which will continue to keep traders on edge. There are still a good number of traders who believe the Fed will begin tightening at their next meeting, so traders will closely comb over the Fed statement for clues to the Fed's potential next move.

Fundamentals

The FOMC may not be the most important news for the market this week, as Q1 GDP data was also released. The consensus estimate was 1.1% growth, down from 2.2% the prior quarter. The actual advanced GDP figure was a paltry 0.2% for the quarter. This lackluster growth forecast is also weighing on the Dollar, especially with Europe stabilizing. The Chain Deflator may also be a very telling figure, as it is a measure of inflation. The Deflator was expected to rise form 0.1% to 0.5%. The actual Chain Deflator was -0.1%, showing deflationary, rather than inflationary, pressure. Both of these figures could be seen especially Dollar bearish. US data trends have been showing a trend of weakening, while Europe has been steadily improving, putting pressure on the greenback.

Technical Notes

Turning to the chart, we see the June Dollar Index breaking support near the 0.9650 level. This has triggered technical selling. The next support level can be seen near the 94.40 mark. Prices have broken the 50-day moving average on the downside, which can also be seen as bearish, and the price of the June Dollar Index closed on the 100-day moving average. The 20-day moving average is nearing the 50-day moving average. A downward crossover of the two averages could add some more bearish pressure.

Rob Kurzatkowski, Senior Commodity Analyst