Global markets have had a mildly negative tone during the overnight session, although Chinese equities were able to grind out a modest gain. Market attention will be focused on the start of the G20 Summit in Poland on Friday, with the President expected to make a trade-related speech in Warsaw later today. In addition, the minutes of the latest ECB monetary policy meeting will be released. The North American session will start out with the June Challenger jobs cuts survey, followed by the June ADP employment survey which is forecast to show a significant downtick from May’s 253,000 reading. The May international trade balance is expected to show a modest increase to the monthly deficit. The latest weekly readings on initial and ongoing jobless claims are forecast to see minimal downticks from their previous readings. May Canadian merchandise trade is expected to show a moderate increase in their monthly deficit. There will be June readings on the Markit services and composite PMI’s, which will be followed by the June ISM non-manufacturing index that is expected to show a modest downtick from May’s 56.9 reading. San Francisco Fed President Williams will speak during morning trading hours while Fed Governor Powell will speak during the afternoon.
The market remains in a steep short-term sell-off from the highs and the lack of safe-haven support today might suggest that negative forces are stronger than expected. Increasing tensions with North Korea, the need to involve China in a solution, Trump meetings with Putin and political tensions in the Middle East are all factors which could provide safe-haven support. News that German bond yields hit an 18-month high and active global growth are seen as bearish forces. Close-in resistance for September bonds is at 154-03. Next support is at 152-05 and 151-07. Key uptrend channel support is at 152-13 and a move below this level will be seen as bearish. The next objective for September Notes is at 124-21 with resistance at 125-08.
The market attempted to shrug-off the ratcheting up of North Korea threats yesterday but selling appears to be picking up some steam overnight and there may be a tendency for long liquidation selling with a more cautious tone to the political situation. The short-term trend looks to turn down; at least temporarily.
The Dollar will need to see mostly positive US data results to find its footing this morning, but may have to wait until tomorrow’s employment numbers are out of the way before finding strong upside momentum. Continued strength in energy prices may help the Canadian post a new high for the move later today.
There have been some divergence recently between the API and EIA surveys, but a draw in today’s EIA report anywhere in the neighborhood of the API figure yesterday could help revive crude oil’s recovery move. Likewise, an implied gasoline demand figure near the early June record could lift RBOB to a 1-month high. Even so, there may be limited upside for energy prices unless there are further (and significant) output cuts from major oil producers. Keep in mind that while the Baker Hughes rig count saw its first downtick in many weeks, US crude oil production should continue to climb higher it starts to top out. Near-term support for August crude oil is at $44.74, while resistance is at $46.94. Near-term support for August RBOB is at $1.5086 while near-term support for August heating oil is at $1.4796.
The gold market could be due for some short covering given the market’s $82 decline since early June and a $26 break since Friday, but we look upon rallies as selling opportunities, as so far there has been no indication of a bottom. The Commitments of Traders reports show plenty of capacity for spec long liquidation. The next downside target for August gold would be the March low at $1,201.40. Look for resistance at $1,236.50 and then $1,240. We would approach September silver in the same manner. Look for support at $15.87 and then $15.646, with resistance at $16.28 and $16.50. Near-term support for October platinum is at $904 while near-term resistance for September palladium is at $848.00.
Despite this morning’s modest draw in LME stocks, fears that the build pattern may not be over could make it difficult for the market to regain upside momentum over the rest of this week. However, traders may be waiting on Friday’s weekly Shanghai exchange figure before giving into ideas of slumping global demand. Near-term support is at $2.6380 with resistance up at $2.6910 and again at $2.7180.
December corn rallied late and closed at the highest level since early June. The overnight trade has pushed the market back into support levels and with pollination coming in the next few weeks traders will not press until the weather threats subside. A close above 409 will open up for a run to 422 1/4. Support is seen at 391 1/2 followed by 387 1/4. If there is not a distinct pattern change in the northern Plains, continue to look to buy pullbacks as reaching a yield above 167 bushels per acre will be difficult.
With the managed money trader category still covering a short position estimated at 70,000 contracts as of today, pullbacks should be well supported. Momentum studies are starting to get a bit oversold, but weather markets never really pay much attention to technical analysis. November soybean buying support is at 963 1/2 with some support at 986 followed by 975 1/4. Keep 1007, 1022 and 1031 1/2 as the next upside targets. Consider buying breaks.
Yesterday’s action in all three wheat classes was extremely volatile and today’s trade could see similar action. With the condition report coming out as expected and some rains in the Midwest and eastern belt, the market is pointing to a well needed pause or pullback that refreshes. Chicago September wheat has a gap from 526 to 533 1/2, Kansas City September has a gap from 529 1/2 to 535. Minneapolis September wheat’s extreme range from yesterday will clearly give the longs reason to bank some profits. The Northern Plains weather continues to be a problem and the spring wheat crop is on the cusp of being a disaster. Still, yesterday is a reminder that markets can get overdone, and when they correct it can be volatile. Close-in support for September wheat is at 523 3/4 followed by 519. Consider buying into support.
The bulls were disappointed with the lower cash market trade this week, and this sparked additional selling pressure yesterday. August cattle selling resistance is at 115.45. Consider selling a recovery bounce to resistance. A resumption of the downtrend leaves 111.35 as next downside target. A 50% correction of the October to June rally leaves 108.77 as key support.
The hog market continues to probe for a short-term peak. Pork production is expected to increase from the 2nd to the 3rd quarters at a higher than normal rate, and this could make the seasonal decline into the late summer as more intense than normal. August hogs could see resistance develop near the 84.65 to 85.05 zone, with key support back at 82.70 and 82.10. Watch for signs of a significant peak soon.
A continued drop in Texas crop conditions has pulled the total crop rated good/excellent to just 54% from 66% three weeks ago. The market held above the June 26th lows which is another positive development. December cotton short-term support is at 67.05, with 68.84 and 69.67 as resistance.
September Robusta coffee in London experienced the highest close since April 19th yesterday and is up slightly today which might help support US futures. September coffee should see near-term support at 125.25 with next key resistance at 133.90 and then 139.60 which would be a 50% correction of the January-June break. Consider buying breaks.
Recent weekly Ivory Coast arrival totals have been in-line with last year’s El-Nino impacted crop, but it may take more evidence of lower output for the market to shift away from a bearish supply outlook. However, the demand side could receive a boost from second quarter grindings which start with the European reading next week. Near-term support for September cocoa is at 1907 while close-in resistance is at the 50-day moving average of 1959 and 1968.
The August contract in London is trading sharply above the October contract and this is typically seen as a positive force. Spread action in New York sugar, however, remains as a negative factor. With a record fund trader short position, there is talk that the market may have already “priced in” a very large surplus for the coming year. Near-term support for October sugar is at 13.56 and 13.25, with resistance at 14.28 and 14.75. Consider buying breaks.