Global Commodity Market Wrap-Up

Last week, metal prices faced significant bearish momentum across the board. Gold showed resilience with a moderate loss of -0.89%, while silver experienced a more pronounced decline of -5.98%. Base metals followed suit with copper falling by -5.75% and zinc by -5.78%. Lead diverged slightly with a smaller decrease of -2.85%. This varied movement contrasts sharply with the stable prices observed in the previous week, indicating a shift towards bearish sentiment. Despite this, the overall outlook for the metals market remains influenced by investor confidence and optimism, suggesting potential for recovery and renewed bullish momentum in the future.

Last week, Natural Gas prices saw a notable downturn, marking a significant loss of -8.63% from their recent upward trend. This decline reflects a shift in market sentiment, possibly influenced by adjustments in supply dynamics or seasonal demand factors. In contrast, Crude Oil prices also decreased significantly by -2.94%, indicating evolving market confidence. Additionally, US Sugar experienced a notable decline of -2.98%, contributing to negative momentum in agricultural commodities.

Global commodity markets are currently witnessing a trend towards losses, reflecting prevailing bearish sentiments. Precious metals are showing cautious declines despite recent gains, while natural gas continues to face downward pressure due to ongoing market dynamics. Crude oil prices, however, are demonstrating resilience by maintaining stability around support levels despite some upward movements. Agricultural commodities are currently traversing a more neutral path amidst broader market fluctuations.

The upcoming Micro and Macroeconomic events that may impact market sentiments include an update on the S&P Global US Manufacturing PMI, New Home Sales, GDP, Initial Jobless Claims, Core PCE Price Index.

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 Coffee September Future (ICE: KCU4) for the next 2-4 weeks duration:

US Coffee September Future (ICE: KCU4)

Price Action and Technical Indicator Analysis:

In the coffee futures market, bullish sentiment continues as September prices remain above important resistance levels, pushing the commodity index higher. Analysis of daily charts shows a breakout above a resistance zone marked by a white candle, signaling potential for sustained bullish momentum. The RSI at 57.97 supports this upward trajectory but advises vigilance against potential overbought conditions. Moving forward, attention is directed towards resistance levels near the 21-period and 50-period Simple Moving Averages (SMAs), which are expected to be critical in influencing upcoming price trends.

Now the next crucial resistance levels appear to be at USc 252.50 and USc 255.00, 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 Coffee September Future (ICE: KCU4) 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 July 23, 2024 (Chicago, IL, USA 2:00 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.