Global Commodity Market Wrap-Up

Last week's significant downtrend in metal commodity prices triggered substantial profit booking. While gold showed resilience with a loss of -0.47%, silver saw a nominal decrease of -0.19%. However, base metals experienced negative trends, with copper falling by -2.91% and zinc losing its positive momentum with a decline of -3.02%. Lead's -1.41% drop diverged from the overall bearish trend. This shift, contrasting with the previous week's high, reflects a blend of nervousness, optimism, and investor confidence in the metals market.

Last week, Natural Gas prices continued their upward trajectory, posting a notable gain of 5.67%. This recovery signifies a significant turnaround from the previous week's performance, reflecting improved market sentiment and demand dynamics. Conversely, Crude Oil prices experienced a marginal decrease of -0.65%, indicating some nervousness following the previous week's decline, despite subdued tensions in the global landscape. Additionally, US Sugar saw a modest loss of -0.60%, albeit contributing to the positive momentum in agricultural commodities.

Global commodities have recently exhibited weakness from their recent highs, influenced by various global developments. Precious metals are currently trading near support levels with a slightly bullish bias. In the energy sector, Natural Gas has demonstrated strong momentum, whereas Crude Oil prices are breaching support levels at these price points. Agricultural commodities, on the other hand, are on an upward trajectory.

The upcoming Micro and Macroeconomic events that may impact market sentiments include an update on the ADP Nonfarm Employment Changes, US Jobless Claims data, ISM Non-Manufacturing PMI, Crude Oil Inventories and Nonfarm Payrolls.

Having understood the global commodities performance over the past week, taking cues from major global economic events, and based on technical analysis, noted below is the recommendation with the generic insights, entry price, target prices, and stop-loss for US Sugar (ICE: SBN4) for the next 2-4 weeks duration:

US Sugar July Future (ICE: SBN4)

Price Action and Technical Indicator Analysis:

The US Sugar futures market is experiencing a bullish trend in July prices, which is positively impacting the base agriculture prices index. This surge seems to be occurring against a backdrop of reduced global tensions, creating a favorable trading atmosphere. From a technical analysis perspective, it's noted that prices are trading above a downward trend line, indicating a potential reversal or shift in sentiment. Additionally, the fact that prices have established a solid bottom on daily charts suggests a strengthening of support levels. The Relative Strength Index (RSI), a key momentum indicator, is around 47.61, which suggests there's still room for further upside potential. Moreover, the current price is trading above its 21-period Simple Moving Averages (SMAs), indicating potential support at this level. However, it's noteworthy that the price is trading below the 50-period SMAs, which may pose as resistance in the near term.

Now the next crucial Resistance levels appear to be at USc 19.60 and USc 19.90, and prices may test these levels in the coming sessions (2-4 weeks).

As per the above-mentioned price action and technical indicators analysis, US Sugar July Future (ICE: SBN4) is looking technically well-placed for a ‘Buy’ rating. Investment decisions should be made depending on an individual’s appetite for downside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. Technical summary of the ‘Buy’ recommendation 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

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 a 2-4 weeks’ time frame. This may be looked at by Individuals with sufficient risk appetite looking for returns within short investment duration. The investment recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the commodities has not been considered in the decision-making process. Other factors which could impact commodity prices include market risks, regulatory risks, interest rates risk, currency risks, and social and political instability risks etc.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: Individuals 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 3: 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 at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

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

Risk Reward Ratio: The risk reward ratio is the difference between an entry point to a stop loss and profit level. This report is based on ~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 June 05, 2024 (Chicago, IL, USA 3:07 AM (GMT-5). The reference data in this report has been partly sourced from REFINITIV.

Note: Trading decisions require a thorough analysis by individuals. Technical reports, in general, chart out metrics that may be assessed by individuals 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.