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Commodity Momentum: Positive Momentum In Agriculture Is Building

BySaxo Bank
AuthorSaxo Bank
Published 04/22/2013, 03:03 AM
Updated 03/19/2019, 04:00 AM

Global commodity markets have returned to a relative state of calm following the dramatic round of risk aversion which hit the whole sector last week. Gold is up for a fifth day, and continues to outperform silver as industrial metals find it much harder to recover. This puts a question mark over how much further this recovery can go without seeing support.

As mentioned last week, Brent crude has not been finding much additional downside space below 100 USD/barrel, and has recovered to a one-week high on Monday, helped by a more friendly sentiment towards stock markets.

Looking at the momentum monitor, most of the action/changes are currently happening within the agriculture sector with wheat, soybeans and sugar having turned tentatively positive the last couple of days. Sugar remains stuck between 17.5 and 18 cents/lb. Hedge funds, that up until recently had built a record net-short position, have begun buying back as a move above 18 cents/lb could create more upside potential. Coffee is another soft commodity which, just like sugar, has felt the pressure from big Brazilian production and has also begun to fight back as made evident by the return of positive momentum on Monday. Just like sugar, hedge funds have been on the sell side of this commodity for a while; any signs of an alteration of direction would force a change - so both of these softs are worth keeping a close eye on.

Momentum Indicator

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