Good morning,
DXU9 96.090 -0.048 GCQ9 1400.4 +3.5 ESM9 2947.50 -8.25 CLQ9 57.32 +0.25
Thursday afternoon recap:
The dollar remained under pressure throughout the day, and most markets remained firm. Gold (GCQ9) never got back to the overnight highs (1397.7), but came close and remained in striking distance of $1400. This puts gold at a 6 year high. The commodity research team from a global bank revised higher its call for gold to $1450 from $1400. Ongoing Middle East tension and the depreciating dollar keep gold supported.
Oil had a very strong performance on the day. The first boost higher came from the Fed’s dovish stance. The next came from Iran shooting down a US drone. The last shot in the arm came in the afternoon from a report from API showing US petroleum exports hit a record high in May. WTI crude (CLQ9) took out $57, closing over $3 higher on the day. Given oil broke so quickly on the move down towards $50, the significant resistance doesn’t come in until above $59.
While most commodity markets were higher, in part due to the softer dollar, the grain markets entered the day lower. This, in spite of, not only the dollar, continued rain still reaping havoc that has fallen upon the grain markets this season. However, the grain market appeared to wake up following the breakfast break, and had a strong showing throughout the day. Reports of export sales of soybeans and corn helped the market, following disappointing news on the weekly export sales report. In addition, not just the current rains, but reports of ongoing rain with cooler temperatures throughout July aided the bid to grains, which worked their way back up towards the highs for the move. A noted analytic group released updated yield estimates for US crops, revising lower the yield call for corn and soybeans, while keeping spring wheat unchanged and raising winter wheat. Cotton prices, in spite of the soft dollar and somewhat optimistic trade prospects, was lower on the day. A poor showing on the weekly export sales report putting pressure on cotton prices.
Friday morning:
The oil market is extending the move higher in the overnight trade, as an explosion at an oil refinery in Philadelphia (PES) shoots NYMEX gas futures higher (over 3%). This is the 2nd explosion this month, and PES is a major supplier of gas to the East Coast. WTI crude (CLQ9) almost got to $58 (57.98) in the trade. OPEC+ has set the dates for the next meeting at July 1-2. Continuation of production quotas for the remainder of the year are expected to be discussed. Also worth noting, yesterday’s rally saw put skew in options drop to the lowest level in a month. Perhaps a bottom just above $50 is in?
The gold market managed to rip through the $1400 level overnight, trading up to $1415.4. The combination of softer monetary policy globally and geopolitical risks/tensions keeps the bid for gold. Gold has dipped back below the $1400 level for the moment, resting up against the prior high ($1397.7). Gold prices should remain supported in front of next week’s G-20 meeting.
The grain markets are mixed today, taking a breather from yesterday’s push to the highs. It may be the first day of summer, but the rains just won’t go away, and it was mid 50 degrees walking out my door this morning. Not exactly grab the beach blanket and sun lotion weather. Today is July options expiration. For corn, the 4.50 strike has an imbalance between calls and puts of 22k to 7k. This could keep the corn market stuck around this level, in the absence of any major market moving news. Wheat prices are lower today, as harvest picks up. Hot and dry weather in Europe and the Black Sea have raised concerns about the size of the expected wheat crop sizes there. Hence, wheat prices have risen in these locales. This, coupled with the depreciation in the dollar over the past couple of sessions improves the chances for US wheat to capture some market share in the export arena. Grain markets should spend the next few sessions squaring up positioning ahead of next Friday’s planting intentions and quarterly stocks report.
Other commodities appear to be correcting from moves made yesterday. Coffee is a touch lower, following yesterday’s rally driven by reduced producer selling out of Brazil with the real trading at its highest level since April. Cotton prices are attempting to bounce after yesterday’s trade down on poor export sales. Hopes for some type of positive trade rhetoric coming out of next week’s G-20 meeting is supportive for cotton. Sugar prices remain stuck in a trading range, predominantly carrying a “12” handle on prices. Lumber prices appear poised for a second consecutive day of trading lower, breaking a string of 9 “up” days yesterday. Lumber prices pushed its way up to a 3 month high on this recent rally.
Copper prices, once again, follow equities. Today, a light volume correction lower, similar to what stocks are observing. Copper has also had a couple of strong sessions, as global easing bodes well for economic development. Hopes for positive comments between Trump and Xi at next week’s G-20 should provide underlying support for copper.
As already alluded to, persistent rains and cooler temperatures continue to be a detriment to the sowing cycle. The rain also poses a risk to damage of established wheat crops. In Canada and the Northern Plains, has some needed rain in tis forecast. The Black Sea and Europe currently have hot and dry conditions, which are bringing unwanted stress to crops there. There have been some analytic groups that have been revising lower expectations for the Russian wheat crop as a result. Overall, a good sized crop is still expected.
Technical Moving Averages:
Product 50 day 100 day 200 day
SN9 864.25 894.75 907.0
CN9 392.25 388.0 390.0
WN9 474.25 479.25 509.0
KWN9 433.0 450.5 494.75
MWN9 536.75 549.75 572.25
CLQ9 59.83 59.25 59.74
GCQ9 1305.3 1313.3 1285.8
LHQ9 91.595 88.605 84.950
LCQ9 109.450 112.715 113.005
KCU9 96.95 100.70 108.95
CCU9 2397 2340 2311
CTZ9 70.49 72.42 74.36
SBV9 12.58 12.89 12.98
JOU9 105.65 114.65 127.80
HGN9 276.50 282.55 278.90
Have a good day,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404