Good morning,
DXU9 98.625 +0.318 GCZ9 1499.4 +0.2 ESU9 2983.00 +4.50 CLV9 57.87 +0.47
President Trump puts a little oomph in the morning coffee with another round of Twitter blasts aimed at the Fed, calling for zero (or lower) interest rates. Equity markets are essentially unchanged at the moment, and gold, which spent most of the overnight session below, has now popped its head back above $1500. The oil market continues to be an interesting trade, pushing back up late in the afternoon yesterday, as the API reported crude stocks declined by 7.23m barrels last week, compared to an expected decline of 2.48m. The dollar is stronger again today, since, in spite of President Trump’s continued calls for lower rates, the market appears to be pulling back somewhat from the very aggressive easing campaign that was being priced in.
The grain markets are slightly lower this morning, with one more day before the latest WASDE report from the USDA. The trade has been rallying as the spec short positions get squared up in front of the report, where the market expects production and stocks numbers to be revised down. Prices are also a touch lower today as China released a list of US products that would not be included on the initial set of tariffs. US agricultural products were not on the list. Speaking of China, there was some news overnight regarding this season’s African Swine Fever epidemic. It was announced corn demand would be reduced by 40m tons, due to ASF. Also, China is facing issues with pork, as large demand is meeting a now large deficit. Prices have been up sharply, and the thought is that prices need to keep going higher, temporarily, to get demand under control. Ultimately, stable pork prices are important for the Chinese economy.
Coffee prices were up sharply yesterday. Hot and dry weather is now in the forecast, creating risks of damage and stress to the beans. This along with the funds carrying a short position has pushed prices higher. The overall firmer dollar over the past few sessions, doesn’t help either, as Brazilian producers are less incentivized to sell. Cotton prices continue to trade higher ahead of tomorrow’s USDA report. Monday afternoon’s downtick in cotton conditions has the market looking for lowered revisions to cotton production. Sugar prices continue to sag as expectations for a large crop remain, and demand moves lower. Cocoa prices are also going down, in part from there not being much interest in taking delivery over the next cycle. Cameroon has large stockpiles of cocoa, making it less attractive for buyers to take delivery from the exchange.
As mentioned, oil prices are about 70 cents higher at the moment, having traded basically 30 cents either side of $58 overnight. OPEC+ is meeting in Abu Dhabi, with deeper production cuts not being discussed at this time. OPEC is calling for lower global demand for oil in 2020. Yesterday afternoon’s lower than expected decline in crude stocks from the API has the market expecting similar coming from the DOE later this morning. This is keeping a bid in prices at the moment.
Gold keeps working back and forth across $1500, but has spent most of the session thus far below the mark. Long profit taking continues, as traders recalibrate monetary policy. After today’s PPI data in the US, tomorrow’s ECB meeting will be the next hurdle for the gold market. While taking out the psychological $1500 support level, if the market keeps correcting lower, $1477.4 is where to 50 day Moving Average comes in for GCZ9. This should be solid support.
Technical Moving Averages:
Product 50 day 100 day 200 day
SX9 885.75 886.75 915.50
CZ9 403.75 410.50 404.00
WZ9 493.25 498.25 512.00
KWZ9 431.75 450.50 485.50
MWZ9 527.25 543.25 566.25
SMZ9 305.3 310.4 316.3
BOZ9 28.73 28.53 29.40
CLV9 56.24 57.65 56.94
GCZ9 1477.4 1404.2 1360.0
LHV9 69.290 75.565 74.395
LCV9 104.340 106.360 111.245
KCZ9 103.05 102.35 106.90
CCZ9 2358 2387 2353
CTZ9 61.31 65.24 70.10
SBV9 11.74 12.13 12.64
JOX9 103.60 105.50 117.25
HGZ9 263.90 269.35 275.80
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404