BESTER DERIVATIVE TRADING TECHNICAL BRIEF

Transcription

1 9 November 2018 US DOLLAR INDEX BESTER DERIVATIVE TRADING TECHNICAL BRIEF The US Dollar Index is developing the third upward leg inside an upward sloping channel which started in September. Resistance is found at around the 97 level. A bullish Dollar view is favoured at the moment. The expected upward leg targets the area. Another hike in US interest rates is expected in December.

2 P a g e 2 MSCI EMERGING MARKET INDEX The Emerging Market Index staged a remarkable recovery on Friday (6.6%) last week, but found heavy overhead resistance at the 1000 level. I expect weakness to return. Support at the 920 level is developing in strength, but I expect the 840 to be reached within the next few months. After the downward trend a sideways trend is expected to take us through the first half of 2019.

3 P a g e 3 USDZAR The ZAR is under pressure from external forces as well as internal growth and stability concerns. Much of this has been priced in. Looking at he USDZAR on a long-term graph, it is quite apparent how undervalued the ZAR is. From a technical perspective the recent upward trajectory (2018) is not sustainable and therefor the risk of gradual strengthening of the ZAR (USDZAR weakness) remains. The current theme has support at R14.00 and resistance at R This upward phase has reached the volatile reversal pattern development stage. During the short-term, I expect Dollar strength to dominate targeting levels around R14.60 again. I believe however that this upward leg will be the last within the current pattern. If support at around R14.00 fails again, the current pattern will be mature and a retracement targeting R13.10 will follow. First resistance is found at R First support is found at R14.09, then R13.90 and then R13.60.

4 P a g e 4 CBOT Corn CBOT Dec Corn is edging higher. A bullish flag pattern is developing this week targeting the $3.88 level. This level is an important resistance level from a technical perspective, since a breach of this resistance may trigger a technical buy targeting the $4.17 area. One can only imagine that an unexpected US / China trade deal can justify such a move at this point in their season. Upside potential hold more risk than downward potential. Strong support is found at $3.60. After resistance at $3.79, resistance can be expected at $3.88. USDA lowered its assessment for U.S. corn production and noted smaller ending stocks, despite also noting lower feed and residual use and lower exports. Production is now estimated at billion bushels, trending 152 million bushels lower than October estimates. Supply fell more than use, sending corn ending stocks down 77 million bushels. USDA s latest per-acre yield estimates for the 2018 corn crop moved from bushels per acre in October down to bpa. Analysts anticipated a larger production of about billion bushels on average yields of bpa. Farm Futures, which regularly participates in these analyst surveys, contributed estimates of billion bushels on average yields of bpa. Global production, meantime, moved up another 29.9 million metric tons to reach billion MT, with increased production estimates for China accounting for much of this increase. That was partially offset by lower European Union production from drought-stressed countries such as Hungary, Poland and Germany. In South America, USDA expects Argentina s 2018 corn production to reach billion bushels (up from October estimates) and Brazil s production to reach billion bushels (unchanged from October). All told, the agency revised its season-average price of corn by 10 cents, with a new midpoint of $3.60 per bushel.

5 P a g e 5 CBOT SOYBEANS CBOT Nov Soy is also developing a major bullish reversal pattern. Great buy opportunities are seen around $8.35. A short-term bullish flag pattern is also developing showing another upward leg could follow soon, which will target the heavy resistance area around the $9.00 level. The risk lies to the upside. A US China trade deal is required to lift this market above $9. USDA also lowered its outlook for soybean production but increased its estimates for ending stocks, due in large part to lower export estimates. Production this year is now forecasted at billion bushels, falling 90 million below October estimates, with per-acre yield estimates of 52.1 bpa falling a bushel from October estimates. Analysts were expecting production to move slightly higher, to billion bushels on per-acre yields of 53.0 bpa. Soybean export estimates fell 160 million bushels to billion for the 2018/19 marketing year, primarily due to lower imports projected for China. World soybean ending stocks for 2018/19 moved higher, from MMT in October to MMT in November. Analysts had expected a more modest increase. Global exports dropped by 2 MMT, with lower U.S. exports partially offset by increases in Brazil, Russia and Ukraine. In South America, USDA expects Argentina s 2018 soybean production to top billion bushels (down from October estimates) and Brazil s production to reach billion bushels (unchanged from October).

6 P a g e 6 CBOT WHEAT CBOT Dec WHEAT composite contract must push through the $5.60 level to trigger strong technical buy signals. The $5.60 level will become a strong support level once it is breached again. The current 2018 trend is upward, but the trend support is currently being tested. The $5 level offers great long-term buy opportunities. SAFEX The images below show the impact of the El Nino effect on the different areas of South Africa with regard to temperature and precipitation anomalies. The current forecast points to the probability of a weak El Nino developing in Our markets have priced in a weather premium during the last few weeks.

7 P a g e 7 SAFEX WHITE MAIZE Dec18WM had a bullish undertone since mid-october, due partly to weather concerns affecting the new season crop. White maize is more bullish than Yellow maize. The green line on the chart below shows the WM / Corn Spread reaching new highs this week. Planting progress is slow due to a lack of precipitation and low temperatures. Pattern analysis points to more upward potential. The Oscillators suggest this market is not over-bought yet, despite the weather premiums. The blue line at the bottom of the graph shows the Dec18/Mar19 calendar Spread. An upward trend in this Spread points to low stock availability. SAFEX YELLOW MAIZE Dec18YM is getting expensive again compared to the international market. Dec18YM/Corn Spread. The technical picture is neutral. The blue line below shows the

8 P a g e 8 Jul19 WM The Jul19WM contract triggered the first round of sell signals in October. This market is building a weather premium at the moment and the technical picture favours a bullish bias. Producers should consider having around 25% of their long-term yield expectation hedged at current levels. The current picture suggests that the next sell signal may be at higher levels. Weather and higher CBOT prices hold the most probable key to higher prices. Looking further into 2019, I don t expect our currency to support local prices before harvest time. Jul19 YM The Jul19YM contract is less bullish than WM. Producers should consider having around 25% of their long-term yield expectation hedged at current levels.

9 P a g e 9 SAFEX SOYBEANS Dec18Soybeans is tracking sideways inside a tightening pattern. Important support is found around R4600, then R4500 with resistance at R4900, then R5000. The sideways movement within this broad band is expected to continue towards the end of the year. SAFEX WHEAT Dec18Wheat is slowly rolling over. Sell signals were recently triggered and support levels have subsequently failed. The following graph is a long-term graph.

10 P a g e 10 Market Brief written by Johann Reinecke Tel: (021) or johann.reinecke@bester.co.za BESTER DERIVATIVE TRADING AND its EMPLOYEES, AGENTS, REPRESENTATIVES AND ASSOCIATES DO NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF ANY INFORMATION OR ANALYSIS CONTAINED IN THIS BRIEF. THERE MAY BE OMISSIONS OR INACCURACIES IN THIS BRIEF. TO THE FULLEST EXTENT PERMITTED BY LAW, BESTER DERIVATIVE TRADING SPECIFICALLY DISCLAIMS ALL REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY, COMPLETENESS, TIMELINESS, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE OF THIS BRIEF AND MAKES NO EXPRESS, IMPLIED OR STATUTORY REPRESENTATION OR WARRANTY REGARDING THE INFORMATION CONTAINED HEREIN. BESTER DERIVATIVE TRADING SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL OR CONSEQUENTIAL LOSS OR DAMAGES ARISING OUT OF, OR IN CONNECTION WITH YOUR USE OF THIS MARKET BRIEF.