Last Trades:
LEJ8: .625 at 118.325, trading in a range of .975
LEM8: 1.15 at 108.525, trading in a range of 1.70
GFJ8: 1.875 at 138.10, trading in a range of 2.725
GFK8: 1.575 at 138.525, trading in a range of 2.40
Cattle Commentary: Cattle futures finally found green pastures thanks to grossly oversold conditions. The next questions would be, is this a relief rally or a sustainable rally. At the moment this is likely a relief rally due to the technical damage done over the past month; bears have taken total control (see technicals below) and there has been a buyer’s strike. As mentioned in yesterday’s report, we worked with clients in reducing some hedges and selling puts against calls in the morning. The market managed to rally but not in the convincing fashion we would have liked to see, that coupled with jitters in the outside market led us to tighten things up by the end of the day. Cash trade has been 125-126 through the week so far. This afternoons cold storage report had beef at 460.276 million pounds, this compares with the average estimate of 485.5 million pounds. Tomorrows Cattle on Feed report coupled with outside market headwinds could add to volatility. estimates are for On Feed at 108.1, Placements 103.4, and Marketings at 101. Boxed beef was higher on the day.
PM Boxed Beef / Choice / Select
Current Cutout Values: / 225.21 / 218.02
Change from prior day: / .83 / 1.63
Choice/Select spread: / 7.19
Cattle Technicals
Live Cattle (April)
The market found relief today brining the RSI back above some seriously oversold levels; the April RSI is currently at 33.48, June is still at 27.86. If the market can attract some carryover momentum into tomorrow’s session we could see a harder rally, there is not a lot of resistance until 120.115-120.25. This pocket represents the 200-day moving average along with the 50% retracement from the August lows to the November highs; keep in mind that near term fundamentals are a bit of a headwind. On the support side, we continue to see 117.15-118.05 as the first pocket, a break and close below encourages long liquidation towards 115.40-115.80. We will be moving to June technicals next week as first notice day draws near for the April contract.
Resistance: 120.15-120.25***, 122.55** 123.35-123.80***
Support: 117.15-118.05****, 115.40-115.80**
Feeder Cattle (April)
Feeder cattle have risen from the dead (for now), the RSI (relative strength index) is back above the 30 level which is typically the line in the sand for oversold; currently reading at 31.48. We are viewing this as a relief rally that could see a near term extension (outside markets may be a headwind) but the bears are in obvious control. The market reclaimed 137.75 which was the first step, the next pocket domes in from 139.275-140.25; as of now this would be the area to look at reselling. If the market cannot find its legs and closes back below 137.75 we would expect to see a test of support from 134.45-134.75.
Resistance: 137.75**, 139.275-140.25**, 141.75***
Support: 134.45-134.75***, 131.25****
Lean Hog Commentary and Technicals (June)
Lean hog futures took another bath today, June finished the day down 1.925 at 75.30, trading in a range of 2.25 on the day. As mentioned in last night’s report, yesterday was a relief rally: “We believe that today’s move higher was a relief rally, meaning that sellers will use higher prices to step back in”. The market made a sprint towards the August 30th lows which was the target mentioned yesterday, our 4-star support pocket remains from 74.45-74.65. Today’s cold storage report showed 614.918 million pounds of pork, this compares to the average guess of 613 million pounds. Pork bellies at 22.291 million pounds.
Resistance: 76.15-76.525**, 78.95-79.60**
Support: 74.45-74.65****, 73.30**
Euro (June)
Session close: Settled at 1.23865, down 24.5 ticks
Fundamentals: The Euro extended post-Fed gains to a high of 1.24675 overnight and topped out on the European open. Next came the catalysts for weakness, French and then German PMIs both missed. While German Business Climate was in-line with expectations, it cooled from last. Lastly, the trio of Eurozone PMIs all missed. The poor data, encouraged traders to ignore the upbeat ECB Economic Bulletin and instead second guess the strength of yesterday’s close. Weak U.S data did little to stabilize the Euro and weakness in equity markets likely contributed to the same here. While we remain unequivocally long-term bullish, the breakout might have to wait. The Euro Summit is tomorrow morning and other than that the calendar on that side of the pond is light. In the U.S Atlanta Fed President Bostic speaks at 7:10 am CT, Durable Goods data is due at 7:30 am CT, New Home Sales is at 9:00 and Minneapolis Fed President Kashkari speaks at 9:30.
Technicals: We can be as bullish as we want, but resistance is resistance and last night price action could not maintain out above first key resistance at 1.2455-1.2462. We noted last night that this aligned with a trend line but a close out above here would be very bullish. Today’s dip traded down to first key support and we are looking for price action to be constructive from here. However, a failure to do so will give the bears a chance to take control.
Bias: Bullish
Resistance: 1.2455-1.2462**, 1.2494-1.2504**, 1.2547***, 1.2659***, 1.2725****
Support: 1.23235-1.2349**, 1.2254***, 1.2040-1.2079***
Yen (June)
Session close: Settled at .9524
Fundamentals: The Yen saw tremendous strength today as headline fear shredded through equity markets, it traded to the highest level since March 5th. Dollar weakness from the Fed yesterday got the ball rolling for the Yen and the combination of the two have it ever-close to a bullish breakout. Poor Manufacturing PMI and Industrial Activity overnight was ignored. Tonight, there is National CPI data due at 6:30 pm CT. The major catalyst for the Yen ahead of the weekend will be equity markets and after a very weak close this will help bid the currency closer to that breakout.
Technicals: Price action is running into a wide ranged major three-star resistance and price action must get out above the top end in order to confirm a breakout. This level comes in at .9491-.95415. We maintain that continued price action above .9459 will be constructive and keep the bulls in the driver’s seat.
Bias: Bullish/Neutral
Resistance: .9491-.95415****
Pivot: .9459
Support: .9382-.9391**, .9310***
Aussie (June)
Session close: Settled at .7712, down 45 ticks
Fundamentals: The Aussie extended post-Fed gains briefly in the overnight but as global equities faltered, so did it. Additionally, a weaker than expected employment report added weight. The White House imposed $50 billion of tariffs on Chinese imports and this is hitting home for the Aussie. With more to come down the pipeline, this will weigh on the Chinese economy which is Australia’s number one trade partner. There is no data out of Australia to finish out the week, but traders should keep an eye on equity markets.
Technicals: We were mostly Neutral the Aussie coming into today despite how bearish we are on the Dollar do to major three-star resistance at .7757-.7784. Price action failed against here head on and the currency slid for the entire session. The good news for bulls though is that it now faces major three-star support. However, this favors the bears if it cuts through such.
Bias: Neutral
Resistance: .7757-.7784***, .7848**, .7902-.7921**, .7986***, .8035**
Support: .7674-.7691***, .7501***
Canadian (June)
Session close: Settled at .7754, up 2 ticks
Fundamentals: The Canadian hit its high later in the morning than the Euro as it tracked the strength in Crude Oil. However, even Crude Oil slid on such a risk-off session. If equity markets continue lower, this will weigh on the Canadian. Still, we are upbeat on the Canadian because we do not see the U.S Dollar gaining much ground at this point. Data out of Canada will play a key role tomorrow; CPI and Retail Sales are due at 7:30 am CT.
Technicals: Price action got out above major three-star resistance at .7771, trading to a high of .78065 but failed to hold. Today’s settlement was not awful, but it did leave a tail. The bulls will maintain an edge until a close back below .77075.
Bias: Bullish/Neutral
Resistance: .7771***, .7840**, 7904-.7908***
Pivot: .77075
Support: .7633**, .7550***
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