Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Technical Update - Selling exhaustion in Grains. Coffee just getting started
Kim Cramer Larsson
Technical Analyst, Saxo Bank
Wheat sell-off indicates exhaustion. Divergence on RSI during the probable last leg down last week indicates weakening o the downtrend i.e. we could very well see a rebound. A rebound that should take Wheat back to around last weeks peak at around $935-940. It can be a struggle however, and if Wheat breaks below $765.75 the support at $736 is likely to be tested.
That scenario is likely to unfold if RSI breaks below its rising trendline.
Corn has bounced twice from strong support at around $585. It is not unlikely it will have another go at that support. At the time of writing RSI is below its rising trendline indicating that Bears will try a third time pushing Corn below the support. If Corn closes below this support next is around 548.50.
If Corn trades above 623.50 the selling pressure is likely to be over and done with, and Corn could rebound to around last week’s peak and the 200 SMA around 613-667.
Soybeans formed a Bottom and Reversal pattern two weeks ago with a Doji followed by a very bullish day. It is not a perfect Doji Morning pattern but it indicates power has shifted from sellers to buyers. Strong support at $1,429.50 seems to hold. A continued rebound to around 1,562-1,579 seems likely.
If sellers come back with renewed energy and push Soybeans prices below 1,424, Soybeans could drop to support at around 1,349.
Coffee broke bearish last week followed by heavy selling pushing the Coffee price below its 55 weekly SMA for the first time in 9 months, down to the 0.382 retracement of the past 12 months uptrend. (weekly chart). Down trend is confirmed.
However, Coffee is likely to see a few days or weeks with sideways/rebound trading. If a rebound makes RSI close above its upper falling trendline it could indicate the trend is about to reverse.
If, on the other hand, coffee prices move below 203 we are likely to see new lows below $194
Cotton initiated the sell-off in Soft Commodities before the other Soft’s followed. But now the selling seems to be over. Divergence on RSI and a Bullish Engulfing candle on the 15th July strongly indicates a bottom and reversal in Cotton. Just a few cents above the support at $90. If Cotton closes above its short term falling trendline a rebound is likely to the 0.382 retracement at around $112 but it could be extended to around 118-122, the 0.50 retracement and 200 SMA.
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