Global Commodity Market Wrap-Up

Last week, commodity prices continuously came under selling pressure due to weak demand and rising dollar index that reached its 5-year high levels. Meanwhile, Gold prices are trading at support levels with a weak bias. Notably, Gold and Silver prices settled at 3.92% and 6.01% weekly losses respectively. Base metal also faced heat as Copper and Lead prices witnessed a weekly decline of 2.62% and 7.85% respectively while Zinc prices also witnessed sharp weekly decline of 7.54%.

On the Energy front, Crude oil prices traded in a broad trading range between $94 to $110 per barrel. Notably, Crude oil prices settled at a marginal weekly gain of 0.28%. However, Natural gas prices settled at a weekly loss of 4.47%. Agricultural commodity prices traded sideways as Soybean and Sugar prices witnessed 1.51% and 0.05% weekly surge respectively while Corn prices declined by 0.45%.

In the recent week, primarily all the commodity baskets showed some positive signs as dollar index prices declined in the current week. Precious metal prices are continuously drifting lower from higher levels but currently trading in a positive zone. Base metals are also rebound from lower levels. On the energy front, Crude oil and Natural gas prices are also trading in a range with positive bias. Agricultural commodity basket is also trading in a positive tone in the current week in line with rising crude oil prices.

The upcoming macro events that may impact the market sentiments include an update on US Philly Fed Manufacturing Index, Natural Gas Inventories, and Unemployment Claims data released weekly.

Having understood the global commodities performance over the past one week, taking cues from major global economic events, and based on our technical analysis, noted below are our recommendations with the generic insights, entry price, target prices, and stop-loss for Natural Gas July Futures (NYMEX: NGN22) and Wheat July Futures (CBOT: WN2) for the next 1-2 weeks:     

NYMEX Natural Gas July Futures Contract (NYMEX: NGN22)

Price Action and Technical Indicator Analysis:

On the weekly chart, Natural Gas prices broke the upward sloping trend line by downside last week and the prices are trading below the breakout point from past two weeks. There is also a negative RSI divergence with price clearly visible on a weekly chart that is supporting our bearish stance. Further, RSI (14-period) is trading at overbought region at ~75.02 level, which indicates profit booking might occur in the commodity in the coming trading sessions. Now the next crucial support levels appear to be at USD 7.65 and USD 6.98 and the prices may test these levels in the coming sessions (1-2 weeks).                               

As per the above-mentioned price action and technical indicators analysis, we can conclude that NYMEX Natural Gas July Futures (NGN22) is looking technically well-placed for a ‘Sell’ rating. Investment decisions should be made depending on an investors’ appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered. The technical summary of our ‘Sell’ recommendations is as follows:

CBOT Wheat July Futures Contract (CBOT: WN2)

Price Action and Technical Indicator Analysis:

On the weekly chart, CBOT Wheat prices recently broke the ascending channel pattern by upside and the prices are sustaining below the same from past three days. Further, RSI (14-period) is trading at ~71.83 level, which indicates positive price momentum. Prices are also trading above its trend following indicators 21-period SMA and 50-period SMA that also support our bullish stance. Now the next crucial resistance levels appear to be at USc 1317.00 and USc 1375.00 and the prices may test these levels in the coming sessions (1-2 weeks).

As per the above-mentioned price action and technical indicators analysis, we can conclude that CBOT Wheat July Futures (WN2) is looking technically well-placed for a ‘Buy’ rating. Investment decisions should be made depending on an investors’ appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered. The technical summary of our ‘Buy’ recommendations is as follows:

Upcoming Major Global Economic Events

Market events occur on a day-to-day basis depending on the frequency of the data and generally include an update on employment, inflation, GDP, WASDE report, consumer sentiments, etc. Noted below are the upcoming week's major global economic events that could impact the commodities prices:

Futures Contract Specifications 

Disclaimers 

Investment Related Risks: Based on the technical analysis, the risks are defined as per risk-reward ratio (~0.80:1.00), however, returns are generated within 1-2 weeks’ time frame. This may be looked at by Investors with sufficient risk appetite looking for returns within short investment duration. Investment recommendations provided in this report are solely based on technical parameters, and fundamental performance of the commodities has not been considered in the decision-making process. Other factors which could impact the commodity prices include market risks, regulatory risks, interest rates risk, currency risks, and social and political instability risks etc.

Entry Price: For the given recommendation(s), the Entry Price is assumed to be at or above/ at or below a certain level. However, a slight deviation in the 'Entry Price' can be considered depending upon the upside/downside potential expected and taking into consideration the Target levels indicated. For example: - An Investor can consider entering the commodity at or above/ at or below a certain range (1%-1.5%) from the Entry Levels recommended depending upon the potential upside/downside expected. Therefore, there can be a slight deviation between the ‘Entry Price’ and the ‘Current Market Price (CMP)’. The ‘Entry Price’ indicated above may or may not be same as the ‘CMP’ shown in the price chart.

Note 1: Investors can consider exiting from the commodity if the Target Price mentioned as per the Technical Analysis has been achieved and subject to the factors discussed above.

Note 2: How to Read the Charts?

The Green colour line reflects the 21-period moving average while the red line indicates the 50- period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the commodity. Commodity with high volumes is more liquid compared to the lesser ones. Liquidity in commodity helps in easier and faster execution of the order. 

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level where-in the commodity prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the commodity prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the commodity prices.

Risk Reward Ratio: The risk reward ratio is the difference between an entry point to a stop loss and profit level. We suggest ~80% Stop Loss of the Target 1 from the entry point.

The reference date for all price data, volumes, technical indicators, support, and resistance levels is May 18, 2022 (Chicago, IL, USA 04.28 AM (GMT -5). The reference data in this report has been partly sourced from REFINITIV. 

Note: Trading decisions require a thorough analysis by investors. Technical reports in general chart out metrics that may be assessed by investors before any commodity evaluation. The above are illustrative analytical factors used for evaluating the commodity; other parameters can be looked at along with additional risks per se.