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June 2015 Archives

June 1, 2015

Bears Eating the Canadian Dollar

Monday, June 1, 2015

The Canadian Dollar looks ready to fall below the .8000 level, continuing a pullback from a short run up in the currency. This pullback, starting in the middle of May, corresponds with the recent run up in the US Dollar, as well as the stabilization of crude oil prices. With no strong bullish trend in crude prices, the Canadian Dollar appears stuck in a rut as the Canadian economy absorbs the shock of the oil price collapse in 2014.

Fundamentals

While the headline news was focusing on the US GDP negative growth rate, Canada also disappointed with a decline of .6% annualized for the first quarter of 2015. This was much lower than the expectations of a slight rise in Canadian GDP of .3% as well as being the first contraction since the 2009 recession. Most of this decline is attributable to the energy industry, as well as the harsh winter weather which affected Canada as well as the United States. The Bank of Canada last lowered interest rates in January of 2015 with a surprise rate cut from 1.0% to .75%. The lackluster GDP results will likely increase attention on the Bank of Canada to see if another rate cut might be forthcoming. Many traders will surely try to be prepared for the potential of another surprise announcement.

Technical Notes

Turning to the 3 month continuation chart, we see a fairly strong bearish trend from the chart. The Canadian Dollar is trading under both the 20 day and 50 day simple moving averages. Traders will be keeping an eye to see if the 20 day simple moving average will cross under the 50 day simple moving average, another bearish signal. Bulls can take some comfort from the 14 day Relative Strength Index, which is still at 36.28, above the oversold level.

Dale Jennings, Commodity Analyst.

June 2, 2015

Oil Holding Steady

Tuesday, June 2, 2015

Crude Oil futures held steady yesterday going into this morning, despite bearish supply side and currency news. OPEC has not curtailed production, but rather, ramped up in recent months. This is counterintuitive, given the extremely large oversupply of Oil on the market. However, it is also not surprising and can be viewed as a prime example of the distrust among members of the petroleum cartel. None of the member nations trusts the others to keep to their production quotas. This week's OPEC meeting is expected to show official quotas unchanged.

Fundamentals

OPEC countries pumped 31.22 million barrels of Crude Oil a day in May, according to a Reuter's survey. This is the highest production from the cartel in 2 ½ years. Saudi Arabia continues to pump near record levels of Oil, and Iraqi exports hit a new record in May. Not all fundamental news favors the bear camp. Cushing, OK, a key storage hub for US petroleum, saw a drawdown for the 5th consecutive week. There was also a surprising increase in refinery activity, which is a metric traders may want to keep an eye on in upcoming EIA reports to gauge whether or not this was an anomaly or a trend. There was also a new decline in US Oil rig count, countering the popular opinion that the number of rigs was slated to increase. The US Dollar is a bit of a wild card at the moment. It looked as though a Greek debt deal was all but done, which could have been seen as Euro positive/Dollar negative, but the ongoing negotiations have become strained. This has been supportive of the Dollar in the near-term. Greece is up against the clock and needs to get a deal done in the next 2 days.

Technical Notes

Turning to the chart, we see the July Crude Oil contract centering around the $60 level. There is little technically to point to where the Crude Oil market may break out. The chart is consolidating, the RSI is neutral, and momentum is flat. The preceding up-move in the Oil market does slightly favor the upside, but that influence fades the longer the market consolidates.

Rob Kurzatkowski, Senior Commodity Analyst


June 3, 2015

Euro Shorts Run for Cover on Potential Greece Deal

Wednesday, June 3, 2015
While the value of the Euro rose by over 2% vs. the U.S. Dollar on Tuesday on hopes for a potential agreement between Greece and its Eurozone creditors, German Bund yields rose 17 basis points to 0.71%. This tightened the yield difference between the 10-year German Bunds and the U.S. 10-year Notes to 155 basis points.

Fundamentals

The Euro FX futures rallied sharply on Tuesday, as short-covering buying emerged on word that a potential deal between Greece and its creditors would be worked out prior to a June 5 debt re-payment to the International Monetary Fund (IMF). A late night meeting of Greek creditors resulted in a deal that was presented to Greek Prime Minister Alexis Tsipras, in hopes of arranging a bailout for the beleaguered nation. While there is no guarantee that Greece will accept the terms of this agreement, it appears more promising that some type of resolution will occur prior to the expiration of the current Greek financial bailout that is set to expire at the end of June. Short Euro futures is still a very crowded trade among speculators, with the most recent Commitment of Traders report showing a combined non-commercial and non-reportable net-short position totaling 208,713 contracts as of May 26. As we saw on Tuesday, even a hint of an agreement can send the Euro sharply higher as weak bears try to exit the market at once. Traders should prepare for potentially increased volatility in the Euro this month, as market participants await the latest news on whether Greece can agree on a deal with its European creditors and remain in the Eurozone.

Technical Notes

Looking at the daily continuation chart for Euro FX futures, we notice the sharp price rally on Tuesday, which set-up a test of the 20-day moving average. However, the rally was not strong enough to reach the uptrend line drawn from the mid April low. While Yesterday's rally appears to have triggered some short-covering buying, the real test for Euro bulls will not occur until major resistance is tested near the 1.1500 price level. The 14-day RSI has moved above neutral, with a current reading of 54.81. 1.1472 is seen as the next chart resistance level for the front month contract with chart support found at 1.0821.

Mike Zarembski, Senior Commodity Analyst

June 5, 2015

Sugar Bulls Cry "Wait 'Till Next Year!"

Friday, June 5, 2015

Weather predictions calling for a potentially strong "El Nino" weather event this year could spell trouble for the Sugar Cane crop in India this year, as forecasters are expecting this season's monsoon rainfall to come in below average. India depends on the monsoon rains for its crop production as nearly 70% of its rail fall occurs from June to September. The India Meteorological Department has already cut its rail fall forecast to only 88% of normal from 93% of normal earlier this year.

Fundamentals

Bearish traders have had the upper hand in the Sugar futures market since 2011 when a major supply deficiency sent prices above 35-cents per pound for the first time since 1980. Well, the old saying that the "cure for high prices is high prices" certainly was evident in the Sugar market as global producers ramped up production which sent the market from a large deficit to a huge surplus in only a few seasons, which sent prices to its current level of just over 12 cents per pound in mid-2015. The outlook for Sugar prices for the rest of 2015 does not look bright for Sugar bulls, as the market remains awash with some private forecasters calling for a nearly 3 million metric ton surplus for the 2014-15 season. However, the outlook for the 2015-16 season could be interesting, especially with the potential for a strong El Nino weather event which could greatly affect the weather outlook for the major Sugar producing regions. In addition, global demand for Sugar is expected to improve in the coming year, especially if we see an improvement in the world economy and especially in emerging markets where a growing "middle class" should spur demand for commodities in general and especially a commodity like Sugar, which is can be viewed as a "luxury" item for many in emerging nations.

Technical Notes

Looking at the daily chart for July Sugar, we notice the market continuing to grind lower as recent attempts to form a bottom have failed. Prices have been holding below the 20-day moving average the past 2 weeks and it would take a close above this widely watched technical indicator to change the short-term momentum from bearish to bullish. The 14-day RSI is moving towards a more neutral level with a current reading of 42.42. The low of 11.83 made back on May 27 remains as the next major support level for the July contract with resistance seen at the June 2 high of 12.50.

Mike Zarembski, Senior Commodity Analyst


June 4, 2015

Bond Bear Market Coming?

Thursday, June 4, 2015

Barring an extreme downturn in the economy, the Federal Reserve will likely begin raising interest rates later this year. With those rate hikes, it is conventional wisdom that Bond prices are expected to fall due to the inverse relationship between prices and rates. The scope and severity of the fall may be more extreme than previously thought.

Fundamentals

The looming interest rate hikes have already been priced into the Bond market to a certain extent. However, traders have begun to re-evaluate Bonds, both sovereign and corporate, as an investment, as well as the interest rate outlook. Bond yields must rise in order to be a viable investment option for investors, especially in light of a higher interest rate environment. There are also liquidity concerns in the bond market, overall, due to the Frank-Dodd Act, which limits federally insured banks from speculating on some assets, including corporate debt. The sharp bearish turn in German Bunds has made its way across the Atlantic and spread to US Bonds. Investors dumped Bunds for riskier assets, expecting a Greek deal to be worked out. ECB Chief Mario Draghi stated that the bank will continue to buy bonds through September 2016, despite signs that inflation has rebounded in the Eurozone. Draghi's statement did little to stop the selling, as investors were optimistic about the Eurozone economy. It is employment week and traders will be focused on job data, especially non-farm payrolls on Friday. The report is expected to show the US economy adding between 225,000-235,000 jobs in the month of May after adding 223,000 in April.

Technical Notes

Turning to the chart, we see the September Bond contract hitting a new contract low yesterday. Prices are on the verge of hitting the 200-day moving average. If the Bond contract closes below the 200-day SMA, it could be seen as bearish in the mid-term.

Rob Kurzatkowski, Senior Commodity Analyst


June 8, 2015

Gold No Longer Glittering

Monday, June 8, 2015

Most traders are aware that the Gold market has been on a wild and volatile ride over the past ten years. Gold was on a tear to the upside from 2005 until peaking in late 2011 during the height of the US debt downgrade, debt ceiling debates, and European sovereign debt crisis. Although there have been periods of choppy trading since late 2011, the bears seem to be currently in control as economic news has contributed to put downward pressure on Gold prices.

Fundamentals

Gold prices are near a 2.5 month low as the US non-farm payrolls came in with a robust figure of 280,000 jobs added. This will only increase speculation among Fed watchers that a rate increase is likely in late 2015. Gold prices and interest rates tend to be negatively correlated, so an increase in US interest rates would mean lower gold prices. Gold bulls aren't getting any support from the ongoing Greek debt default headlines, a sharp contrast to just a few years ago. The constant barrage of Greek Euro exit or default news seems to have numbed traders, rather than cause an immediate rush into Gold.

Technical Notes

Turning to the 6 month continuation chart, we see Gold possibly forming a double bottom near the 1150 support line. Chartists will be watching to see if gold breaks below that 1150 line, which could signal even further bearish pressure. August Gold is trading below both the 20 and 50 day Simple Moving Averages, another bearish sign. Resistance is found around 1225, which has been tested twice since April, with both rallies failing to break through that level. RSI is at 36.8, a neutral to slightly bearish indicator.

Dale Jennings, Commodity Analyst


June 9, 2015

Can the Corn Slide Stop?

Tuesday, June 9, 2015

Tomorrow's USDA report, which will be released at noon ET, is expected to show 2014/2015 US ending Corn stocks near 1.86 billion bushels. This would be an increase over 1.851 bushels in May. New -crop 2015/2016 ending stocks are also expected to be revised higher to 1.780 billion bushels, up from 1.749 billion bushels in May. World ending stocks for the 2014/2015 crop year are expected to be 192.53 million tons, which is in line with last month's USDA estimate. On the weather front, the heavy rains have interfered with planting progress in the Western Great Plains, which have not completed their planting. This is certainly something to keep an eye on for traders, as heavy rains can be seen as a mix of good and bad for the new crop.

Fundamentals

Gold prices are near a 2.5 month low as the US non-farm payrolls came in with a robust figure of 280,000 jobs added. This will only increase speculation among Fed watchers that a rate increase is likely in late 2015. Gold prices and interest rates tend to be negatively correlated, so an increase in US interest rates would mean lower gold prices. Gold bulls aren't getting any support from the ongoing Greek debt default headlines, a sharp contrast to just a few years ago. The constant barrage of Greek Euro exit or default news seems to have numbed traders, rather than cause an immediate rush into Gold.

Technical Notes

Turning to the chart, we see the December Corn contract bouncing off support at the 365 level and advancing above the 20-day moving average. This suggests that a near-term low may be in place. Near-term support could be found at the 375 level. Prices are coming up on the 50-day moving average. If prices are able to cross above the 50-day moving average, the market may capture a bit more momentum.

Rob Kurzatkowski, Senior Commodity Analyst


June 10, 2015

Dollar and Bond Yields Rally Following Employment Report

Wednesday, June 10, 2015

Our neighbors to the north also produced better than anticipated jobs figures in May, with Statistics Canada reporting payrolls rose by 58,900 last month, vs. a decline of 19,700 jobs in April. More importantly, more than half of the new jobs created were full time jobs, with nearly all of them in the private sector. Year over year, the Canadian economy created a net 192,300 jobs, despite sharply lower oil and natural gas prices that have hurt employment in the all-important energy sector.

Fundamentals

The employment picture in the U.S. continued to improve, but at a sluggish pace, according to the most recent jobs data. On Friday, the Labor department reported that 280,000 jobs were created in May, up from the revised 221,000 jobs created in April. This was better than the 225,000 jobs increase forecasted by analysts. Professional and business services sectors posted the largest employment increase with 63,000 jobs created, followed closely by the leisure and hospitality sectors which added 57,000 jobs last month. Wages were also a bright spot, with average hourly earnings rising by 0.3% to $24.96. Wage growth is up 2.3% year over year so far. As has occurred frequently in the past, not all of the data in the employment report was positive. The unemployment rate ticked up by 0.1% to 5.5%, the average workweek remained steady at 34.5 hours, and the labor participation rate remains near historical lows at 62.9%. The U.S. Dollar was the biggest beneficiary of the better than expected employment data, rising to 12-year highs vs. the Japanese Yen. U.S. yields moved sharply higher, with the 10-year note reaching its highest yield since October of last year.

Technical Notes

Today we will take a look at the weekly continuation chart for Japanese Yen futures. If we start at the major low made back in 1985, the Yen has staged an impressive rally vs. the U.S. Dollar. However, we can see that the uptrend line drawn from this major low has failed, which appears to be signaling the end of the historic bull market. There is little in the way of longer-term support until the 0.7400 price level, and below that at 0.6850. Resistance is found near 0.8900.

Mike Zarembski, Senior Commodity Analyst

June 11, 2015

Gold Rallies into End-of-Week Data

Thursday, June 11, 2015

Gold futures closed higher for the third consecutive session, as traders await a slew of economic data to finish the week. Today's retail sales and claims data, along with tomorrow's PPI and Michigan Sentiment are of particular interest to traders. In addition to the economic data to cap off this trading week, traders will be anxiously awaiting next week's FOMC rate decision. The Fed is not expected to change interest rates, but traders will attempt to sift through the language of the central bank's policy statement to gauge when the Fed will raise rates. In theory, the sooner the rate hike, the more bearish the statement may be for the Gold market.

Fundamentals

One of the main drivers of Gold prices this week has been the weakness in the US Dollar Index, which has started off the month on a sour note. The weakness in the greenback to start the week is somewhat counterintuitive, given the strong non-farm payroll data last week. Physical Gold buying has seen an improvement this year, largely driven by Indian jewelry demand, which is up 22% in the first quarter. German safe haven investment demand was up 20% in the first quarter of this year, which is not at all surprising given German public opinion over the Greek bailouts. Traders are cautiously optimistic that demand for Gold will continue to rise in China, India and Russia, but they are not holding their breath hoping for the same growth as India had seen in Q1.

Technical Notes

Turning to the chart, we see the August Gold contract breaking through near-term support near the 1175 level last week, only to rise back above the level on Tuesday. Prices may continue to trade in a channel between 1175 and 1225 in the near-term. The RSI indicator has recovered from oversold levels and sits in the lower portion ofneutral territory.

Rob Kurzatkowski, Senior Commodity Analyst

June 12, 2015

No Soft Landing for Cotton Prices this Year?

Friday, June 12, 2015

The most recent Commitment of Traders report shows large and small speculators moving in opposite directions the past week, with non-commercial traders shedding over 6,600 contracts off of their net-long position during the reporting period ending June 2. Non-reportable traders were adding to their overall bullish position by adding over 1,000 net-long positions during the same timeframe. Commercial traders remain net-short Cotton but reduced the overall position by nearly 5,600 contracts last week.


Fundamentals

Cotton bulls cannot seem to catch a break in 2015 as the market seems determined to cap any rally attempts, even as prices hover near 6 year lows. The USDA supply/demand report released on Wednesday showed little change in both global production totals as well as U.S. Cotton inventories despite what appears to be U.S. Old Crop Cotton exports surpassing USDA expectations. What appears to be weighing on Cotton prices is the legitimate concern that China will continue to release Cotton inventories from state-held reserves, which will help to lower the import demand from Chinese end-users. China is believed to hold just over half of the current global old-crop Cotton inventory so exerts an outsized influence on the global market. As we move further into the new-crop season, traders will be keen to watch for production estimates out of both India and the U.S. as weather conditions will determine if these two leading Cotton exporting nations produce a bumper crop or fall short of expectations and help to tighten global inventories heading into 2016.


Technical Notes

Looking at the daily chart for new-crop December Cotton, we notice prices becoming choppy as the market has entered a period of range-bound trading following a nearly 6-month long rally from its 2015 lows made back in late January. The prospects of an upside breakout following the USDA report was dashed on Thursday, as a sharply lower close following a move to 2-week highs helped to reduce the bullish enthusiasm among short-term traders. The 14-day RSI is neutral, with a current reading of 50.76. 63.03 remains the next major chart support level for the December contract, with resistance seen at 66.59.

Mike Zarembski, Senior Commodity Analyst

June 15, 2015

Treasuries Bounce as Greek Drama Unfolds

Monday, June 15, 2015

While it may not make the top headlines, many savvy traders of all financial markets pay attention to the yield on Ten-Year US Treasury notes. Bond prices are inversely correlated with the yield. Macroeconomic and political events can quickly move bond markets, as traders quickly respond to such news by buying or selling bonds.

Fundamentals

Last week was a volatile week in the Ten-Year Treasury market, as traders balanced the positive economic news from US economic reports against the news from Europe about the varying possibilities of another deal to prevent a Greek default. US non-farm payrolls for May came in at a robust 280,000 jobs, above expectations. Also, job openings at US workplaces in April are at a record 5.38 million. This caused a rise in the yield for Ten-Year Notes and declining prices. However, European uncertainty caused some nervousness later in the week. The Greek government has negotiated with the International Monetary Foundation to bundle all of their loan payments into one lump sum of 1.54 million Euros due on June 30th. Even if Greece is able to make the payment, there is continued speculation about how much of an additional strain that would put on the cash-strapped government's ability to make payroll and pension payments. This uncertainty caused Ten-Year Note prices to rise and yields to decline.

Technical Notes

Despite the end of week run-up, the 3-month continuation chart for Ten-Year Notes is still bearish. Ten-Year Notes are trading below the 10-day and 50-day Simple Moving Averages, a bearish sign. The 20-day Simple Moving Average crossed below the 50-day Simple Moving Average back in the middle of May, another bearish sign. The 50-day SMA was a previous level of resistance; now resistance is found on the 20-day SMA.

Dale Jennings, Commodity Analyst

June 16, 2015

Summer Doldrums Hit Oil Market

Tuesday, June 16, 2015

The tropical storm threatening the Gulf Coast of Texas has given Crude Oil prices a modest boost in early trading, but the oversupply has prevented further advances. The US National Hurricane Center has issued a tropical storm warning from Baffin Bay to High Island along the Texas coast. Chevron and Royal Dutch Shell have evacuated non-essential workers from Oil platforms, but neither company has shut production in the region. The weather warning could explain the strength of WTI versus Brent Crude Oil. Also, barring any significant setbacks to production due to the storm, pressure seems to favor the downside in the near-term.

Fundamentals

The global Crude Oil supply glut continues to grow, despite decreasing US Oil rig counts. Baker Hughes reported that the US Crude Oil rig count declined for the 27th consecutive week to 635 for the week ended June 12, 2015. The number of active rigs has dropped by 59% after peaking at 1,536 last year. There is hope that this will reverse course, with the recent firmness in Oil prices possibly motivating drillers to open up production once again. Brent Crude Oil prices have been under pressure due to the number of unsold barrels of Crude Oil being stored. Physical Crude stocks originating from the North Sea and West Africa being stored offshore in the Atlantic Basin continue to rise. This may continue pressuring Brent prices and have a negative spillover effect on WTI Crude. EIA inventories are expected to show a drawdown of 1.8 million barrels for the week. It will be interesting to see where Cushing, OK inventory levels will come in. The size of the Cushing drawdown or build will likely have more of an impact on trading than the overall number.

Technical Notes

Turning to the chart, we see the July Crude Oil contract trading sideways, with prices centering around the $60 level. The July contract may be able to regain some upward momentum if it can manage a close above the 62.50 level. The RSI and momentum are both giving neutral readings

Rob Kurzatkowski, Senior Commodity Analyst

June 17, 2015

Why Gold Prices are Weak Despite Greek Jitters

Wednesday, June 17, 2015

While Gold futures traders may be taking a "ho hum" attitude towards Gold, physical buyers, Asian buyers in particular, are becoming more interested in buying Gold at current price levels. Government data out of India shows Gold imports up 11% in May with purchases totaling over 2.4 billion dollars.

Fundamentals

Gold's role as a so called "safe haven" investment is coming into question among some analysts citing its relatively poor performance in the wake of a possible default by Greece should negotiations with its creditors to receive much needed financial aid break down. The reluctance for traders to move some assets towards Gold seem to stem from a rising U.S. Dollar which makes commodities including Gold more expensive for non-dollar buyers, as well as the belief that the Federal Reserve will indeed begin to raise interest rates, potentially as early as September, which would also be viewed as negative for the precious metals sector. Ultimately, it may be Gold's lack of price movement that is keeping market participants at bay, with the lead month futures trading in a relatively narrow $70 price range since mid-March. This lack of price volatility and directional trend could be leading traders to explore at other markets that they perceive to have better prospects than that of Gold at this time.

Technical Notes

Looking at the daily continuation chart for Gold futures we notice a price consolidation pattern forming for most of this year as market volatility has contracted. Prices are trading below both the 20 and 200-day moving averages, giving Gold bears the edge. The 14-day RSI remains in neutral territory with a current reading of 45.92. Support is seen at the June 5 low of 1164.00, with resistance found at 1232.00.

Mike Zarembski, Senior Commodity Analyst


June 19, 2015

When Fed Doves Cry, Equities Fly!

Friday, June 19, 2015

Traders got some mixed economic data on Thursday which will do little to sway the Fed from remaining cautious on when it should announce the first interest rate hike since 2006. The consumer price index in May rose by 0.4% which would normally strike fears of rising inflation; however the price gain was below the 0.5% increase economists were expecting. In addition, the annual inflation rate is still below the Fed's targeted level of 2%, sparking little in the way of an inflation scare to force the Fed to act sooner rather than later to start to raise rates. On the employment front, initial jobless claims fell by 12,000 last week to a seasonally adjusted 267,000, which was better than the forecasted 276,000 claims traders expected. While the employment picture appears to be improving, workers' wages have not increased dramatically, which is keeping wage inflation in check and the Fed on hold for an interest rate hike this summer.

Fundamentals

The Federal Reserve appears to have put the kibosh on any interest rate hikes this summer, as a cut in the economic growth expectations, as well as a downward revision in interest rate projections for the next two years as traders pricing in the odds first Fed Interest rate hike out to late Q4 of this year. Fed Chair Janet Yellen sounded a more "dovish" tone during the press conference following the 2-day Fed Open Market Committee (FOMC) meeting that ended on Wednesday. While Yellen noted some improvement in the U.S. labor market, there were still some concerns that the economy was not yet ready to sustain an increase in interest rates and would remain "data dependent" to help determine the time table for an interest rate increase. Among the most notable market reactions following the Fed meeting was a rally in U.S. equities and a sell-off in the U.S. Dollar, in particular against the Euro currency. The Dollars reaction was noteworthy given the continued concerns of a lack of an agreement between Greece and its European creditor's regarding additional funding to prevent a Greek default on its debt payments due at the end of June.

Technical Notes

Looking at the daily chart for the September E-mini S&P 500 futures, we notice the market breaking out of its recent mini-correction on Thursday, as the index posted gains of over 1.4% as of this writing. Prices are once again trading above the 20-day moving average and momentum as measured by the 14-day RSI has turned positive with a current reading of 57.42. For the lead month September futures we see support at 2061.00, with resistance found at 2126.25.

Mike Zarembski, Senior Commodity Analyst

June 22, 2015

Bond Traders Try to Read Fed Tea Leaves

Monday, June 22, 2015

U.S 30 Year Bond traders were eagerly waiting for the release of the minutes of the Federal Open Market Committee this week. While few traders were expecting a surprise rate hike for June, the release of the minutes and press conference are always scrutinized for hints of upcoming rate increases.

Fundamentals

Traders viewed the release of the minutes as slightly dovish, with the Fed cutting back on their expectation of GDP growth to a revised growth figure of 1.8% to 2%. The Fed also reduced their expectation for continued drops in the unemployment rate, they are now expecting 5.2%-5.3%, revised upward from as low as 5%. However, this is tempered by a continuing rise in the labor force participation rate, a bullish signal for the economy. Traders are also quite interested in the timing of future rate increases, opinions are divided if the first increase of 25 basis points will come in September or December. If there is a rate increase in September, then traders will be speculating on the future timing of rate increases, with the potential for yet another rate increase in December being the most bullish viewpoint.

Technical Notes

Turning to the 3 month continuation chart, we see several bearish signals. First, the 20 day Simple Moving Average crossed below the 50 day Simple Moving Average back in May. Second, 30 Year Bond prices are trading below the 20 day Simple Moving Average. Finally, the 14 Day Relative Strength Index is at a very weak 30.41. The 20 day Simple Moving Average has been a resistance level lately, as prices struggle to break above. Currently support can be found at 147-16 while resistance is at 151-29.

Dale Jennings, Commodity Analyst


June 23, 2015

Gold Ping Pong

Tuesday, June 23, 2015

Gold futures remain in range-bound trading, as the price of the metal continues to be bounced around by a number of factors. The current economic and political climate will likely do little to change things for the metal in the near-term. The Greek situation is not likely to be resolved anytime soon and neither will the interest rate question in the US. These factors alone will create indecisiveness among Gold traders.

Fundamentals

The US Dollar Index has been somewhat range-bound over recent weeks, which has left the metals market without a compass of sorts. Some of the focus on the aforementioned Greek debt crisis may alleviated, as there is optimism that a deal may be reached soon. With the Greek situation under control, for the time being, the focus shifts back the FOMC and the rate decision. The most recent policy statement from the Fed seems to be a bit more cryptic than prior releases, which makes interest rate timing question a bit more murky. From a purely fundamental standpoint, traders may want to keep an eye on Asian demand. Demand in the region has been unexpectedly strong and it will be interesting to see if this can continue. Healthy physical demand could be the tipping point for higher prices, outweighing the offsetting factors.

Technical Notes

Turning to the chart, we see the August Gold chart trading sideways over the past several months . To this point, prices have managed to hold above support at the 1775 level. The momentum and RSI indicators are giving neutral readings, giving no hint of a market direction.

Rob Kurzatkowski, Senior Commodity Analyst


June 24, 2015

Too Much of a Good Thing for Soybeans?

Wednesday, June 24, 2015

The weekly crop progress report, released each Monday at 3 pm central time, showed 65% of the Soybean crop was rated good to excellent. This was down 2% from the previous week. On average, 90% of the Soybean crop has been planted vs. 87% last week and 95% last year.

Fundamentals

Summer rains are normally a welcome sight to grain and soybean producers as the heat of June, July and August can put great stress on the developing crop. However, the 2015 growing season is starting with an overabundance of moisture, which is sparking concerns that not all of the expected Soybean acreage will get planted this season. While the leading Soybean producing states of Iowa and Illinois are seeing over 90% of the Soybean crop already planted, the totals drop sharply as one moved south, with only 42% of the crop planted and 72% of the crop in Kentucky and Tennessee. While these are not among the top 5 Soybean producing states, the potential reduction in planted acreage could still be important in turning 2015 from a record to near record harvest, to a season with only average Soybean production. The 6 to 10 day weather outlook published by the Climate Prediction Center is calling for below normal temperatures and above normal precipitation for most of the eastern and southern portions of the Soybean growing area in the U.S., which if accurate, will do little to help producers struggling to finish planting Soybeans by the end of June.

Technical Notes

Looking at the daily chart for November Soybeans, we notice what may turn out to be a bear trap having formed once the market fell below 900.00 back in May and having been sprung on the latest rally above 925.00. Prices are now above both the 20 and 200-day moving averages and momentum as measured by the 14-day RSI is strong, with a current reading of 67.12. 967.50 looks to be the next chart resistance level for the November futures, with support found at 922.25.

Mike Zarembski, Senior Commodity Analyst


June 25, 2015

Consumers Spending Again

Thursday, June 25, 2015

Consumer spending rose its highest level in 6 years in May, which has received mixed reviews from equity traders. This can certainly be seen as positive news and helps alleviate some fears over corporate earnings and overall economic health. However, this could come at the price of speedier rate hikes from the Federal Reserve. The central bank has been progressively more cryptic in its rate discussion over the past several meetings. This has caused some uneasiness among traders, especially with economic data being so inconsistent.

Fundamentals

Purchases in the month of May increased 0.9%, which is the highest month to month increase since August 2009. Traders were looking for a more modest increase of 0.7%. Incomes rose 0.5 percent for the second consecutive month. Consumers have seen better employment, a modest increase in income and stable fuel and food costs, which has led to speculation that consumers have been able to increase their savings. E-mini S&P futures have continued to establish new all-time highs on a fairly consistent basis, but traders have been very uneasy about earnings growth. Companies are hiring more and many have questioned whether revenue growth could outpace new employment costs. If this rise in consumer spending is the beginning of the trend, traders may rest a bit easier on the corporate earnings front. A rise in consumer spending could lead to Fed inflation targets being met, which could open the door for interest rate hikes from the central bank.

Technical Notes

Turning to the continuous chart, we see the e-mini S&P continuing to trend higher. The rate in which prices are rising, however, has flattened out. This could be a sign that the market is forming a rounded top and prices may begin to gradually fall. Conversely, this could simply be consolidation before a further increase in prices. Several of the moving averages are close to bearish crossovers, which is something traders may want to keep a close eye on.

Rob Kurzatkowski, Senior Commodity Analyst

June 26, 2015

Natural Gas Rally Fueled by Mother Nature

Wednesday, June 26, 2015

Large speculators have been reducing their net-short position in Natural Gas futures of late, but still hold a sizable short position according to the most recent Commitment of Traders report. During the reporting period ending June 16th, non-commercial traders reduced their net-short position by over 23,500 contracts to 239,488. Commercial traders were mainly on the other side of this trade, reducing their net-long position by over 25,700 contracts. Small speculators added over 2,100 new net-long positions during this time period.

Fundamentals

It has been difficult to be a Natural Gas bull for most of 2015, as ample stockpiles combined with increased production, despite a decline in Gas drilling rigs, has kept rally attempts in check. However, a recent increase in Gas usage for power generation has led to Gas storage builds that were below expectations the past few weeks, which in turn allowed Natural Gas prices to post a nearly 8% gain so far this month. On Thursday, the Energy Information Administration (EIA) reported that 75 billion cubic feet (bcf) of Gas were placed in storage last week. This was 3 bcf below analysts' expectations and the smallest build since early April. Above normal summer temperatures, especially in the west, have caused a sharp increase in power usage which, in turn, has increased the commercial demand for Natural Gas in June. How far prices may rally could be in control of Mother Nature and to what extent above normal temperatures will spread throughout the lower 48 as we move into the heart of summer in July and August. However, if temperatures turn to more "normal" levels for most of the nation, it will become increasingly difficult for Gas prices to rally much beyond 3.000 given current production levels.

Technical Notes

Looking at the daily chart for lead month August Natural Gas futures, we notice that outside of the month of May, where we saw a bit of a spike in price volatility, the market has been rather tame for most of 2015, with prices spending the majority of the time between 2.750 and 3.000. The 20- and 200-day moving averages (MA) are portraying a mixed picture as to the direction of the market, with prices currently trading above the short-term 20-day MA, but still well below the longer-term 200-day MA. The 14-day RSI confirms this lack of a distinct trend, with a reading of a very neutral 52.96. Support for the August futures is seen at 2.570, with resistance found at 3.167.

Michael Zarembski, Senior Commodity Analyst


June 29, 2015

Euro Remaining Resilient Against Political Pressure

Monday, June 29, 2015

Traders seemed to have shrugged off the recurring news about a possible Greek exit from the Eurozone. The Euro has reacted sluggishly to the ongoing negotiations between Greece and its creditors. The lack of extreme moves in the Euro may indicate that traders are confident that another deal will be done, although it may be yet another temporary fix.

Fundamentals

In addition to Greece, there are other factors affecting the Euro over the longer term. While the United Kingdom does not use the Euro, they are part of the European Union. Prime Minister David Cameron has promised a nationwide referendum on the UK's continued involvement in the European Union ("EU"). Mr. Cameron has promised to negotiate changes in Britain's relationship with the EU. However the referendum will likely take place before the negotiated changes are approved by all EU member states. The possibility of a United Kingdom exit from the European Union could have a much larger impact on the Euro, as the UK is the second largest economy in the EU.

Technical Notes

Turning to the 3-month continuation chart, we see that the Euro is still trading above the 50-day simple moving average, but barely. There is little divergence between the 20- and 50-day moving averages, and the 20-day moving average is providing resistance. This lack of divergence between the 20- and 50-day moving averages could mean a bullish breakout if the 20-day moving average were to cross above the 50-day moving average. A bearish sign would occur if the 20-day moving average were to cross below the 50-day moving average. The 14-day Relative Strength Index (RSI) is at a neutral 40.19.

Dale Jennings, Commodity Analyst

June 30, 2015

Stay or Go?

Tuesday, June 30, 2015

The Euro suffered heavy losses Sunday night, as Greece pondered whether or not the country will remain part of the currency union. German Finance Minister Wolfgang Schaeuble told lawmakers that Greece would remain part of the Euro for the time being, even if voters rejected austerity. This assurance from Mr. Schaeuble sparked a rebound in the Euro currency, which actually finished the day higher. Greece is expected to withhold a $1.7 billion payment to the IMF, which will leave the country without the protection of the bailout program. At this point, the whole Greece situation has irked many traders, who have grown tired of the soap opera regarding their payments as well as the overconfidence from Greek officials with regard to not being thrown out of the currency union.

Fundamentals

Traders were expecting to get some sort of near-term resolution to the Greece debt payment this week. Instead there is at least another week of waiting. On the economic front, data from both the US and the Eurozone has been very mixed lately, which has given currency traders very little to work with. German data continues to lead the way in Europe, with unemployment and retail sales data exceeding expectations. Employment data in the US could trigger a bit more activity in the currency markets. US jobs data has been a bright spot for the economy, and more positive data could put pressure on the Euro. The Federal Reserve has been more cryptic in the language of its public statements of late, which is why traders are looking forward to next week's release of the FOMC minutes.

Technical Notes

Turning to the chart, we see the September Euro currency contract continuing to trade in a tight range between 1.1000 and 1.1500. With the exception of yesterday, daily trading ranges have also been tightening. This could be a sign that the market is ready to break out of the range, but further consolidation is certainly not out of the question. The oscillators are giving neutral readings as well.


Rob Kurzatkowski, Senior Commodity