UK Feed Wheat (LWX24) has shown an impressive rise since March 11. The volatility is at its highest since November 2022, as the commodity keeps marking higher highs in the last 5 weeks. The 10-day exponential moving average (EMA) has acted as almost perfect dynamic support in its path, to the benefit of long traders.
Watch out for full daily candles crossing above or below the 10 EMA, as statistically this has acted as a very reliable indicator for trend changes.
The 14 day RSI above 70 is warning us that we are in the overbought area. This means that without any supportive fundamental news, the market could be ripe for a pullback.
UK wheat production will fall in 2024 due to wet weather affecting the planting. Recent news of increased demand from Japan and China is also supportive.
From here, the market awaits the USDA report this Friday for more direction.
Positive Performers This Week in Europe
UK Natural Gas (NFM24) +8.27% - We see lower storage levels across Europe in recent months, reduced flows from Norway, and colder weather expected for April and May. European gas storage levels are at 64%, which is good, and the inventory increase is expected to cover Europe´s demand for the coming months.
There is evidence of stronger and growing renewables output in Europe, and the current supply of LNG will likely cover 100% of the needed storage for the next winter. Asian prices are trading at higher levels than in Europe for the spot prices, and therefore is the main competitor from the demand side.
The contract hit a bottom on Feb. 19, and has recently crossed above the 10-week EMA. The trend is upward for now, but there is a lot on the fundamentals to restrain any spike. Rather, look for ranges to trade over the next months.
Milling Wheat (MLU24) +7.46% - Germany is reporting a 6% drop in milling wheat this season, together with the EU-27 production forecast to be 120 Mt, which would be 4% less than in 2024. Wheat stocks are limited in most countries leading the exports, which is supportive of current prices.
The contract hit a low at 188 on March 4, and is about to break the 10 EMA on a weekly basis. The trend is supported by producers on the long side, as reported by the latest COT from the US contracts. Both fundamentals and technicals support the continuation of the current trend.
Cocoa #7 (CAU24) +4.92% - The contract hit a top on April 19, marking the record of 9,285, and since then the drop has been an impressive 30% in just a few days, crossing down all of the 10, 20, and 50 EMAs in a panic pullback. These exorbitant price levels have not attracted more volume or liquidity, and the market is bound to remain very volatile in the next weeks.
The deficit in cocoa world markets remains as before, with severe supply issues in Vietnam and the Ivory coast. Price action is supported by fundamentals, and the latest wild sell-off is now back to the uptrend.
Tin Refined 3M Cash (Q2Y00) +2.51% - Despite the selloff that started on April 22, prices came back, and are above all of the 10, 20, and 50 EMAs. Inventories were at 7685 tn at the start of 2024, coming down to the current 4780 tn at the LME.
Indonesia (the largest exporter) is still restricting exports and limiting production. In Myanmar Wa State, there was a recent order suspending mining and processing operations, which keeps the market tight.
LME inventories are declining, but levels are within above average of the last 5 years at current levels. Tin's trajectory again could be explosive, aiming north of 45,000; however, with a forward curve signaling 32,500 for December 2024, the spikes could be short-lived.
Negative Performers this Week in Europe
Robusta Coffee 10-T (RMN24) -13.55% - In a similar pattern to cocoa, robusta coffee peaked on April 18 at 4,338, and from there followed a crash down to 3,261 4 weeks ago. It has crossed down all the 10, 20, and 50 EMAs, positioning it in bearish territory. Only a quick recovery, crossing above the 50 EMA (as of today, at 3589), will ignite hope that the crash is over.
The crash is the result of fund liquidations from overbought areas, and Vietnam reporting lower export demand together with improving weather conditions. For now, the mood is bearish.
Aluminium Hg 3M Cash (P4Y00) -3.28% – Following the closure of a major aluminum plant in the United States, there are concerns about a worsening aluminum shortage.
The CME Group (CME) reports growth in the number of clients in its aluminium market that is directly competing with this LME contract. The London Exchange has just reported significant growth in its aluminium stocks in its warehouses, currently at 903,850 tons. This has moderated the latest impact of the ban on Russian origin aluminium. The strong demand for aluminium scrap from India and China is further supporting the bull case, withreports from Asia sources mentioning a deficit in the scrap market.
Price action is testing the 20 daily EMA as support, with strong resistance at 2,680, still moving below the 10 EMA. Any breakout north for the 10 daily EMA could explosive again.
Nickel 3M Cash (P8Y00) -1.83% - Nickel is on a bullish path, with a mild pullback in the last 3 weeks, and currently locked between the 10 and 20 EMAs. We see a normal daily volume of around 4,000 contracts, and the technicals - including Barchart Opinion - point towards BUY with a soft trend. Shangai Exchange is looking to expand internationally its nickel futures contracts (under development) to challenge the LME market leadership. LME, like for most industrial metals, sets currently the global benchmark prices.
Nickel is used to manufacture stainless steel and electric vehicle (EV) batteries, so is following a growing industry with growing demand. The path of least resistance, for now, is to the upside.
On the date of publication, Cesar Marconetti did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
