Commodity Chart Deck #13

Extreme weather is good for Coffee, Sugar and Cocoa. Precious Metals currently show a good risk to reward ratio. The US Dollar looks tricky, but when it breaks out, things will become interesting.

The past trading week was marked by enormous volatility. This volatility is in my opinion here to stay for some time. Why? The Delta variant threatens to withdraw momentum from some raw materials prices, but at the same time, extreme weather conditions support some commodities such as Grains, Sugar or Coffee. Here is your overview for this week:

Precious Metals were able to make up as good as all the losses from Sunday night’s little flash crash. Grains were surging on worse than expected planting numbers from the latest WASDE report. Cocoa, Coffee as well as Sugar, and Cotton were gaining because of forecasted cold temperatures in the planting areas. The Energy is currently the biggest Delta case looser. Inventories were again higher than the consensus anticipated. Nevertheless, it seems like there are enough commercials buyers, to buy the dip.

The weather component gains more and more important in times of climate change and extreme weather situations literally around the whole world. That’s the reason why I will cover this important topic from now on more closely. Therefore I will add a new segment to the report, which is all about weather forecasts in strategic important planting or inventory areas.

US Dollar Update

“If you get the direction of the USD right, it becomes much easier to predict the performance of other asset classes”

The base case scenario for the USD stays the same:

If we see a new higher high, so basically a close above 93.5, the USD long scenario would be confirmed for me. But if we see on the other hand a break below 91.7, a short scenario would be in play.

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Open Futures Positions:   
- Long Gold @ 1785 USD 
- Long Crude @ 69.27 USD (NEW)
- Long Corn @ 572' USX (NEW)
- Long Bitcoin @ 42880
- Short 5y Treasuries @ 124'02 (already closed @ breakeven)

As always, here are my current top setups, selected from all major commodities and other important markets:

Copper, Cocoa, Coffee as well as Cotton remain in a Backwardation, which is an extremely bullish fundamental aspect. Currently, I would watch those and buy potential dips as long as the demand stays higher than the current supply. The current Delta variant could cool off the price surge but I think not for long.

Elsewhere In The Macro World

U.S. consumer sentiment fell in early August to the lowest level in nearly a decade as Americans grew more concerned about the economy’s prospects, inflation (especially rising cost of homes/cars) and the recent surge in coronavirus cases. The number was much worse than the consensus anticipated and highlights that US consumers are fearful of the state of the economy.

This week look out for:

  • Retail Spending numbers on Tuesday

  • Crude & NatGas inventories on Wednesday and Thursday (which are currently rising = bad trend for price)

  • Rising Delta cases = more restrictions = more pressure ahead for commodities and stocks?

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Till next Monday, Lukas

If you have any questions in the meantime, please feel free to contact me via Twitter or Mail.

(The Commodity Report is not investment advice)