Last week’s election-driven spike in the U.S. Dollar Index hit key resistance, sparking questions about a potential peak amid global economic shifts. Meanwhile, corn futures are rising, and soybeans face uncertain signals. Here’s what to watch next in currency and commodity markets.
U.S Dollar Index:
Last week we saw a spike higher in the U.S. dollar index after results from the election were made apparent that Trump would become the next president of the United States. The Dollar index ran right to the 105.150 resistance level and eventually closed below it the balance of the week. This keeps the original thought in place that this could represent a near term top and potentially put in place a longer-term downturn back below the bottom we saw at the end of September.
If this is incorrect, we would look to the 107.350 area as next resistance. If this were to occur the next move would still be for lower based on some of the wave counts, we are seeing.
As the world reserve banks enter a time of economic easing. This would make sense that we would see a lower U.S. dollar vs other world currency like the Japanese Yen, Swiss Franc, Euro. And even some of the higher risk currencies like, Mexican Peso and Brazilian Real. Wave counts are suggesting the next move of significance will be for lower in the U.S. Dollar index and as I look at the landscape of global economies. This seems to match up on the surface.
Corn Markets
Corn Futures continue to surprise much of the trade. Since the correction we saw in the second half of October. Corn Futures found support on top of the 50 day and 100 day moving averages. Like we discussed in the November 3rd update. Since then we have seen a impulsive move higher. This supports the overall view of our opinion on the market that we should be seeing the next large move higher. We have had working orders in since September at 4.36 dec board and we have kept these orders in even when the October push lower seemed to be making a new leg lower in the corn market.
We will be working with growers on an induvial basis to clean up basis contracts at the elevators. Ethanol plants, and feed yards with the 4.36 targets and now a new 4.47 target. If the market continues its strong move higher to the 4.47 target this week. I will only recommend being a total 30-40% sold for 2024 corn crop considering our longer-term outlook.
This is why working on an induvial basis will be important as we clean up basis contracts at the elevators before we are forced to roll at the end of the month. Rolling at the elevators is always more expensive than in your commodity futures accounts and you will have access to more capital by selling the bushels and holding the margin in your commodity futures accounts.
For storage bushels we have been targeting the 4.54 March level as our first target to get bins cored. Again, maintaining and managing the % sold will need to be managed. Sometimes the physical corn just needs to get moved. (Harvest need to move, coring bins, cash flow) but timing doesn’t always match up with futures pricing.
Soybean Futures
Soybeans found some late week support from a Soybean Oil rally. More on Soybean Oil futures below. Friday it was reported by Reuters that President Trump was asking his former trader advisor Robert Lighthizer to once again advise him on trade negotiations. RJO seemed to think this was an important enough headline that they posted it to the “Market Insights” tab in the portal. And labeled it as the reason why the bullish WASDE report was quickly sold off in the grain complex. Could be the reason, could also just be farmers selling along with traders exiting the weekly trend on a Friday.
We remain long 2024 crop soybeans and don’t have much interest selling this far in the red. We have our option strategies on off the March. Basis levels continue to improve. Watching the processor in Southern MN and NW IA and with the roll from Nov to Jan. There was a 11-12 cent carry. It appeared most processors only add half of the carry to their bids. This results in 5-6 cent better basis for the producer.
What to Watch
I will be watching the old highs in the 10.87 area; some technical analysts are looking for one last push lower. Into new lows past 9.55 to complete wave structure. We may look to add some additional protection if the market makes a move into the 10.50 area. Just in case bean futures want to push down one more time. It may be a case where meal makes a bottom before soybeans start to turn lower and soybeans never do push past 9.55. If Soy Oil and Soybean Meal can make a move higher then it will be unlikely soybeans push to new lows.
So the outlook for soybeans is a bit unclear compared to corn for our opinion. But still not a price where we want to be selling with conviction.
Soybean Oil Futures:
We have been very bullish soybean oil since we have been seeing economies around the globe adopt higher levels of biofuels and renewables…see our update from October 30th Indonesia’s B40 renewable target 2025. Not to mention the results from the September soybean crush it was reported that the U.S. saw record soybean bushels crushed but the Soy Oil stocks were below the past 5 years. This should send out alarm bells.
Pull backs in this market should be viewed as corrective and should be bought.
Soybean Meal Futures:
The selling continued in soybean meal futures this past week, pushing into new lows. Many traders put on spread trades in the soybean complex, these spreads can be Long Soy Oil and Short Soybean meal. We feel that meal is falling victim to the rally in Soybean Oil. The fundamentals have not changed much in meal. It is true that we are producing more than expected based on the crush data, but we are also getting it exported at a elevated rate. Eventually the price of meal will get too cheap relative to all other commodities and will be bought once again.
As for our clients that use meal in feed rations, we have been buying meal on the way down. Our last official recommendations were in the 315-320/ ton area. Late last week we added to our coverage. As for a target to the downside, we see the 288-285 dec meal will be a layer of support.
Once we can get our eyes set on a weekly reversal, we will book for a extended period because like a lot of these grain and livestock markets, we are looking for 50-61.8% retracement of the 2022 highs.
For expert advice on navigating the challenges in the commodity market, Contact our Commodity Brokers for tailored guidance.
Disclaimer
The risk of loss in trading futures and/or options is substantial, and each investor and/or trader must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades, statistical services, and other sources that Paradigm Futures believes to be reliable. We do not guarantee that such information is accurate or complete, and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice given will result in profitable trades.
