Good morning,

 

DXH0  97.230  +0.170              GCG0  1543.2  -7.4                                     ESH0  3286.75  -3.00                CLG0  58.60  +0.52

 

Equity prices are a shade softer this morning, as prices have recovered from lower levels earlier, receiving a boost from bank earnings.  While it may not be a clear “risk on” day, gold prices are again lower today and oil is also recovering from lower price levels earlier, in a sign that the current tensions in the Middle East continue to de-escalate.  The official signing of Phase 1 of the trade deal with China is expected tomorrow.  In a harmonious gesture yesterday, the US declared it is removing the “currency manipulator” tag from China.

 

Gold prices continue to sag, as safe haven positions continue to be unwound and assets are moved around.   Signing of the trade deal is thought to be a positive for global economic growth, which would allow global monetary policies to remain where they currently are.  Since the alternative is a faltering economy and an easing of monetary policy, this should keep currency prices relatively stable which applies some pressure to gold. 

 

Oil prices traded below $58 in the overnight trade, as long positions established on last week’s spike continue to be taken off, also as on the notion of an easing of tensions.  Prices have popped back above $58 this morning, as it was reported that China imported a record amount of crude oil in 2019.  While that pace is expected to slow in 2020, this positive demand spin provided support to oil prices.  This afternoon, API releases its projections for US crude inventories from last week, which can give a jolt to prices late in the  day.  If oil is able to test and extend through the overnight low (57.72), keep an eye on the 200 day moving average (57.23).  A breach of this level, with some momentum, can generate new selling pressures from stop loss orders along with algorithmic sell signals being generated.

 

Grain prices are higher this morning, once again led by the wheat market.  Egypt is conducting another purchase tender today, with offers coming in from 9 companies, predominantly in the Black Sea region, with one from France.  The prices on this tender are once again higher than the last, pushing up global wheat prices.  Another bullish story for wheat prices came out yesterday afternoon, when it was reported the Russian Ag Ministry is contemplating a temporary limit on the amount of wheat that is available for export outside of the Eurasia Economic Union.  This potential curtailment of Russian exports could open up the prospects for other producing countries to gain some market share.  Soybean and corn prices are inching higher today, ahead of tomorrow’s signing, even with the USDA increasing the size of the crops for both in this year’s harvest in last Friday’s WASDE report. 

 

Coffee prices took on another leg down yesterday, (down 11% in January, after staging a 33% rally in Q4 of 2019) in part led by the depreciation of the Brazilian Real in yesterday’s trade, which allowed producers to be more aggressive offering available inventory.  Also putting pressure on coffee was selling generated off of the COT report from last Friday afternoon, which showed the spec long position of the fund community was pared back as much as the market believed it to be.  A survey of analysts projects a large Brazilian supply of coffee this season, which could also depress prices.  Sugar continues to move higher, as the supply outlook continues to tighten.  Sugar prices are now trading at the highest level in 2 years.  Cotton prices were higher again yesterday, also from the trade deal and the lower production and stocks figures on Friday.  The trade in cotton may want to view the continued rally cautiously, as spec long positions by the funds continue to increase.  Once the trade deal is signed, if there is no additional bullish story out there, this market could be vulnerable to some profit taking. 

 

Economic data today in the US brings December CPI, where the market expects no change on a monthly level (+0.3% vs +0.3%), but expects to see an increase in the annual rate (+2.4% vs +2.1%).  The core numbers are expected to remain unchanged for both (+0.2% & +2.3%).    

 

Technical Moving Averages:

Product               50 day                100 day               200 day

SH0                      928.75                   927.00                   921.50

CH0                      384.00                   386.75                   405.50

WH0                    533.25                   515.25                   514.00

KWH0                  450.25                   436.50                   458.25

MWH0                532.25                   535.75                   550.50

SMH0                  304.2                     305.4                     310.9

BOH0                   32.58                     31.34                     30.28

CLG0                    58.70                     56.65                     57.23

GCG0                   1495.1                   1506.3                   1442.9

LHG0                   69.945                   71.950                   75.695

LCG0                    125.525                 120.040                 118.570

KCH0                   120.75                   111.25                   108.90

CCH0                   2547                       2477                       2444

CTH0                   66.90                     64.51                     66.50

SBH0                    13.11                     12.72                     13.04

JOH0                    100.90                   103.20                   108.60

HGH0                  273.50                   267.65                   271.40

 

Thanks,

Mike

 

 

Michael Clifford

 

141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC                                              

312-604-6404