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BREAKING: The White House has released a statement that they are considering an additional 100 billion in tariffs on China.
We posted two “2 Minute Drills” on our site today 1 for livestock and 1 for grains. Click this link to watch.
LEJ8: 1.25 at 114.275, trading in a range of 1.15
LEM8: 2.425 at 104.75, trading in a range of 2.35
GFJ8: 2.775 at 137.275, trading in a range of 3.575
GFK8: 2.75 at 137.875, trading in a range of 3.55
Cattle Commentary: Cattle futures saw a continuation of yesterday’s rally today opening higher and leaving a gap on the chart (see Technicals below). Is there a fundamental reason why we have seen fat cattle rally 7.675 off the lows and feeders and even 9.00 off of their lows in two days? You could make the argument; but you may get some funny looks. In our minds there wasn’t a reason for the market to be where it was in the first place other than it was overextended due to long liquidation from the funds. Cash has softened up this week with the bulk of it coming in at 117 live and 185-190 dressed. With April futures close to first notice day June has started to do its part in closing that gap. Chinese tariff talk drifted away fast. USDA boxed beef was lower on the day.
PM Boxed Beef / Choice / Select
Current Cutout Values: / 215.09 / .13
Change from prior day: / (3.08) / .13
Choice/Select spread: / 8.78
Live Cattle (June)
This move higher has been fast and fierce, like many had expected (timing is an important piece to trading). We think the market can see a continuation towards 106 but it’s going to be a bit of a tug of war from that point. For clients who were able to get long exposure on Wednesday, we are recommending reducing that before the weekend. Volatility invites more volatility so expect that to linger into the first half of next week’s trade. We feel a consolidation from 106-109 would be healthy for the market before making its next directional move. The gap open from this morning comes in at 102.625, this will be first support for tomorrows session. A conviction close below leaves the door open for lower lows, bulls must defend this level to round out the week.
Resistance: 106.00-106.45***, 108.75-109.05****
Support: 102.625***, 99.55-99.75**, 96.40-96.75****
Feeder Cattle (May)
May feeder cattle gapped higher this morning but manage to fill that gap before finishing the session towards the highs of the day. If the market can ride this momentum into the morning we would be looking for the market to test our resistance pocket from 139.275-140.25; this is a wider pocket than we would like but that’s the market we have right now. As mentioned in the fat cattle section, we will be working with clients who bought over the last 48 hours to reduce that exposure into the weekend. Bulls make money, bears make money, pigs get slaughtered; take what the market gives you.
Resistance: 139.275-140.25***, 143.15-143.50****
Support: 135.40-135.75**, 128.90-129.05***, 124.85-125.90****
Lean Hog Commentary and Technicals (June)
June lean hogs finished the day up .575 at 73.85, trading in a range of 1.225. The less active May contract was the hero today finishing near limit up. The June contract is where all the action is so we are sticking with that in our daily Livestock Roundup. The market got out above first technical resistance at 73.95 but was not able to close above this level which may keep the market in check into the weekend. If the bulls can chew through this level, we would expect to see an extension towards 76.00-76.25. A failure to get a conviction close above technical resistance keeps the bears in total control and new lows would not be out of the question.
Resistance: 73.95**, 76.00-76.25**, 78.05-78.175***
Support: 70.25-70.50****, 66.00****
Session close: Settled at 1.23005, down 45 ticks
Fundamentals: Data this week has consistently missed expectations for both Europe and the U.S. This morning Market Composite PMI, Services PMI and Retail Sales all missed out of the Eurozone. Next, U.S weekly Jobless Claims were the highest since January 11th and the Trade Deficit expanded more than expected. Remember, out of the U.S this comes on the heels of ISM Non-Manufacturing, PMIs, Durable Goods Orders and Factory Orders all missing yesterday. Still, the Dollar is higher on the session. Well, former Fed Chair Yellen spoke at a private event last night and said that she imagines three or maybe four hikes this year. We view these comments as the true culprit in today’s price action when coupled with reduction in trade war fears. All of this though is noise. That is because tomorrow’s Nonfarm Payroll report is the main event due at 7:30 am CT tomorrow. Average Hourly Earnings will be the most closely watched component and expectations come in at +0.3%. This comes on the heels of a disappointing +0.1% last month. We are confident in saying that a miss here would weaken the Dollar tremendously tomorrow. Though job creation is much less important than it has been, it will be taken into account. Expectations are for a gain of 193k jobs in March. ADP Payroll data was just about the only bright spot on the calendar this week and came in at 241K. This strong read on Wednesday has likely given hope to the Nonfarm read. While 193k is expected, we imagine a read under 210k would be disappointing placing even more emphasis on wage growth. Traders must stay nimble not only digesting this number, but Fed Chair Powell is scheduled to speak at 12:30 pm CT. Tomorrow is a cornerstone day, feel free to contact our trade desk at 312-278-0500 for questions throughout.
Technicals: Price action settled below first key support as we head into the most crucial piece of data this week. While holding this level and furthermore a green session today would have much more constructive, we are not discouraged. We believe a sizable portion of today’s move is due to long liquidation ahead of tomorrow’s data and short-covering in the Dollar Index. Still, us bulls do have reason to be concerned, this was the third session with a lower high and the fifth out of seven closing in the red. On the bright side this has allowed the 14-day RSI to relieve down to 42, the lowest level since the first week of March when the Euro put in a strong bottom against what is our major three-star support at 1.2254. The high of the week came in on Monday and aligns with first key resistance, a move out above here tomorrow is very bullish.
Resistance: 1.24035-1.2427**, 1.2475-1.24915**, 1.2547***, 1.2659***, 1.2725****
Support: 1.2254***, 1.2040-1.2079***
Session close: Settled at .9350, down 64.5 ticks
Fundamentals: We were clear as day yesterday that you cannot be long the Yen anymore and reminded traders that we Neutralized our Bias on Tuesday. As trade war fears are reduced, there has been a massive valve release in safe haven assets over the last 24 hours; Gold and Treasuries have also been buried. Adding to this has been relief in the Dollar as shorts cover ahead of Nonfarm Payroll. Data out of Japan tonight will be important to watch as always, but this tape is weak and will be technically driven ahead of Nonfarm Payroll, after which, the read will take over. Household Spending is due at 6:30 pm CT, Foreign Reserves data is due at 6:50 pm CT and Average Cash Earnings is due at 7:00 pm CT. Coincident and Leading Index Indicators are due at midnight CT.
Technicals: Today was the technical breakdown throw trend line support that has been budding for more than a week. We were clear that longs must bail though we could not get on board with a short because of our Bias in the U.S Dollar and ahead of jobs data. Price action is running into long major three-star support slightly lower. The tape is likely to test into this area tonight, but the fundamentals will take over tomorrow morning at 7:30 am CT. Only a close back above what is now major three-star resistance at .9410 will neutralize this weakness.
Resistance: .9410***, 9498-.9504**, .9530-95415**, .96145***, .9729***
Support: .9310-.9342***, .9120-.9145***
Session close: Settled at .7683, down 24 ticks
Fundamentals: The Aussie Dollar saw rejuvenated weakness today despite a solid read on Trade Balance data last night. Strength in the U.S Dollar, weakness in the commodity sector and still lingering trade war fears have made longs jumpy. There is no data out of Australia tonight and tomorrow will be all about what comes from the U.S calendar.
Technicals: Today was a poor session for the Aussie as it failed to hold ground out above our pivot. We have been Neutral as the bottoming over the last week has been soft and the rally over the last 24 hours struggled to hold into the strong sell volume from March 27th. The bears are potentially in the driver’s seat with tomorrow’s data being ah hurdle.
Resistance: .7757-.7784***, .7848**, .7902-.7921**, .7986***, .8035**
Support: .7644*, .7501***
Yesterday’s close: Settled at .7850, up 21 ticks
Fundamentals: The Canadian Dollar put in an impressive session despite the large than Trade Deficit and the stronger U.S Dollar. Of all the commodities, Crude Oil did pull a decent session. Most importantly, there is a continued run of positivity around a NAFTA deal getting completed this month. Still, we point to the technical strength as a major catalyst. Tomorrow will be crucial though with jobs data from both the U.S and Canada due at 7:30 am CT.
Technicals: We went outright Bullish the Canadian upon the breakout on Tuesday and the technical momentum is alive and well. Price action settled out above first key resistance at .7840. Major three-star resistance is a tremendous barrier and a close out above here will signal that the recent downtrend is over; .7904-.7919 aligns multiple technical indicators as well as the 200-day moving average. However, traders should now become cautious not only because of tomorrow’s data but that the 50 and 100 day moving averages come in at .7878 and .7893, just in front of the major three-star. It has been a nice three day run, and we remain slightly Bullish, but because of this and the data we are Neutralizing our Bias; it is good to lock in gains and we will look to reposition if the coast is clear.
Resistance: 7904-.7919***, .7968*, .8045**
Support: .7771***, .7735**, .77075**, .7633**, .7550***
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