Commodity Corner: Morning Comments

Good morning,


DXU9  96.675  +0.226                       GCQ9  1438.8  +10.7                                                                ESU9  3003.00  +5.50                      CLQ9  56.03  +0.73


The markets were awakened yesterday afternoon with President Trump announcing the US shot down an Iranian drone in the Strait of Hormuz (Iran has come out and denied it was their drone), which quickly brought a bid to the sagging oil market.  Also creating excitement were comments from Fed Vice Chairman Clarida and New York Fed President Williams, both suggesting a more aggressive approach to a reduction in short term interest rates for monetary policy would be appropriate.  Short term interest rate futures screamed upwards on these comments, the dollar was smoked and gold shot higher.  The market has basically conceded that a 25 basis point cut to rates is coming at the July 31 meeting.  These comments forced the market to strongly consider the cut being 50 basis points.  Overnight, a spokesperson for the NY Fed came out and said that the market may have misinterpreted NY Fed President Williams comments, in that he was speaking at an educational event, about policy over a 20 year horizon.  Not directly speaking about current monetary policy or what may be coming in about 10 days.  To keep the markets even more off balance, St Louis Fed President Bullard came out and said he would be in favor of lowering the rate by 25 bps at the next meeting, but not by 50.  Keep in mind that President Bullard was the dissenter at the last meeting, when the Fed left rates unchanged.  Bullard wanted a cut of 25 then.  What action the Fed will take on July 31 has been a very hot topic in the market since the last meeting on June 19, and will remain so for the next week and a half. 


The other story worth paying attention to is the excessive heat wave that is sweeping across the country today and thru the weekend.  Potential stress to the crops is a concern, but there have been significant ran systems that preceded this wave, and more rain expected on the back end, which could minimize the amount of stress.  Monday afternoon’s crop conditions and progress numbers will be viewed carefully, trying to determine how the crops are faring as they move through the development stages.  Estimates for Russian wheat production are being lowered, which may create some opportunities for US wheat, if prices can drop some.    


Other commodity prices are higher today, in part driven by the weather and helped by yesterday’s big decline in the dollar.  Prices are also firming on renewed optimism of progress on the trade talks front.  It was reported that Treasury Secretary Mnuchin had a phone conversation with his Chinese counterpart last night.  While no information about the call has been released, the hope for progress is supportive.  Cotton is also trading higher on the recent storms potentially causing damage to the crops.  Copper prices have a big bid today, from the trade talks, equity bounce and with the strength in gold.


It is a relatively light economic calendar today, and over next week.  This leaves the market vulnerable to other inputs such as geopolitical tensions, trade negotiations, monetary policy discussions and extreme weather.  Of course, President Trump is usually a good bet to provide some type of stimulus for the markets.    


Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                       894.75                   907.75                   924.75

CZ9                      432.25                   411.25                   406.00

WU9                    505.75                   486.00                   514.00

KWU9                  454.75                   450.50                   496.25

MWU9                549.25                   549.75                   572.50

SMZ9                   317.5                     316.7                     319.2

BOZ9                   28.28                     29.09                     29.64

CLQ9                    57.68                     59.58                     58.80

GCQ9                   1351.2                   1327.7                   1303.4

LHQ9                   84.185                   88.525                   84.890

LCQ9                    106.135                 111.135                 112.315

KCU9                   101.80                   100.30                   108.70

CCU9                   2439                       2373                       2331

CTZ9                    66.31                     70.77                     73.21

SBV9                    12.38                     12.69                     13.00

JOU9                    104.10                   110.80                   122.85

HGU9                  269.25                   280.30                   278.70


Have a good day,




Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC