Commodity snapshot (26.07.18)

In this article, we present in a brief way, the most interesting commodities recently:

Soybeans:

• Soybeans prices rebound due to trade agreement reached between the US and European Union after Trump-Juncker meeting
• European Union promised to buy much more soybeans from the US immediately, expecting removal of steel and aluminium tariffs. 
• Despite that, the European Union market for soybeans is much smaller than the Chinese (EU imports: 15,3 mln tonnes versus China imports: 95 mln tonnes)
• Soybeans prices bounced from vicinity of 840 cents per bushel (local lows from the turn of 2015/2016)
• The price upward pressure may be limited

Soybeans consumption in the European Union is rather limited without prospects of bigger growth. Source: Bloomberg, XTB

Soybeans prices rebounded due to trade agreement between the US and the EUR. The price has the first key resistance around 900-910 cents per bushel. Next target can be determined at 61.8 Fibo retracement of 2004-2012 upward wave. Source: xStation5

Oil

• Trump and Rouhani from Iran traded some threats over the last weekend
• Iran pointed that it is able to shut the Strait of Ormuz which is responsible for almost 20% of oil transit in the world
• Trump warned that Iran would “suffer consequences the likes of which few throughout history have ever suffered before” due to threats to the US
• There is a negligible probability of a shutdown of this seaborne passageway for crude oil shipments, but in this case, the price could jump to at least 150-200 USD per barrel according John Kilduff of Again Capital

The price could jump to at least 150-200 USD per barrel in case of shutdown of Strait of Hormuz passageway. Source: EIA

Wheat:

• Wheat prices are supported by trade agreement between the US and Europe
• Major countries of destination for US wheat exports are Mexico, Japan, Philippines, Brazil, Taiwan and South Korea – still there is a risk of trade tariffs for US wheat exports (Mexico, Japan, South Korea)
• Strong droughts in Europe can significantly reduce production possibilities in countries such as Germany, Poland, Ukraine and even France. First estimates indicate that decline can reach 15-30% on an annual basis and crop will be the lowest in six years
• Prices in Europe are  the highest in at least 3 years.
• Seasonality suggests that grain prices should continue decline in coming months

Seasonality suggests that summer should bring decline to grain prices. Source: Bloomberg, XTB

Wheat tests a key resistance at 550 cents per bushel. It is worth noticing that a trading volume is rather low which indicates that current price movement may be fragile. Source: xStation5 

Gold

• Reduced risk leads to outflow from safe-haven assets
• Moreover, the dollar is still in a game together with strengthening yields
• A moderate outflow of gold is seen from ETF treasuries
• The gold price respected the biggest correction in recent downward trend a few times
• The gold price may test a vicinity of 1315 once again. In case of further yields increase, there is a possibility to decline to 1200 USD per ounce. The key support should be seen at 1180 USD per ounce.
• In longer term we expect a continuation of upward trend started in the end of 2015

Nothing changed on the price of gold. Despite recent risks, the price was not able to break short term downward trend. Source: xStation5