Last Week's European Commodity Winners
Zinc Special Hg Cash (Q3Y00), +4.71%
Zinc is up 18% this year, but the trend has made a pause in the last weeks. The forward curve indicates a stable level at 3,050 for 2025. LME Zinc inventory stocks last reported were 276,275t (Dec. 2), the highest since May 2021 and at an average level historically.
LME Future and Options fund net positions last reported (Nov. 22) were +30,901 contracts. This shows moderate optimism from institutions.
China's recent stimulus package had little effect on demand, and the possibility of tariffs by President-elect Trump is also limiting further rises.
Zinc weekly prices are well above the 10- (3,108), 20- (2,946) and 50-unit (2,825) exponential moving averages (EMAs), but the uptrend stopped 8 weeks ago. Since then, there is range with a bottom at 2,950 and top at 3,150.
Currently, prices are testing the 10 EMA. If zinc remains below this level for a full week, it will send a bearish signal.
An inverted hammer pattern in the week of Oct. 21 has confirmed a stop to the uptrend, and the market will need to get past 3,150 to build confidence for long positions.
Cocoa #7 (CAH25), +4.5%
The cocoa futures market is experiencing significant volatility and high prices due to ongoing supply challenges and persistent demand. London cocoa futures rose 70% in 2023 and another 37% in 2024 so far.
The market expects a third consecutive year of supply deficits, with an anticipated shortfall of nearly 400,000 metric tons for the 2023/24 season.
Moreover, since July 2024, prices are well above the 10, 20, and 50 EMAs in an impressive uptrend with increased volatility.
Côte d’Ivoire and Ghana, which together supply more than half of the world's cocoa, are struggling with adverse weather conditions. As reported before, demand in this market does not adjust as fast to high prices (inelastic market), so long positions have benefited enormously.
We are seeing record prices in a speculative market rising too fast, so long traders should use caution, as a sharp reversal can be around the corner.
Euro Buxl (GXZ24), +3.5%
I reported in my previous article about Buxl, the 30-year German bond contract, which is experiencing an impressive rally, with the last 7 days only showing green bars.
Traders expect the European Central Bank will lower interest rates in December by 0.5%. Inflation is already within the 2% target, and Germany is not showing enough growth.
Bond yields are dropping fast in German and European fixed income markets, which will be good news for the commodities sector into 2025.
Last Week's European Commodity Losers
Robusta Coffee 10-T (RMF25), -5.4%
Brazil's robusta and arabica coffee exports have increased, partly mitigating global tightness. There is currently long liquidation of positions reported by ICE, which is putting downward pressure on prices. Added to that, the record weakness in Brazil's currency (real) against the dollar is bearish news for this market.
Robusta coffee made an inverted hammer candle pattern on Nov. 29, which is a very bearish signal that puts an end to the uptrend, opening up a possible bear market.
Current prices are breaking down below the 10 EMA (5,093) in a market where profit takers and short traders have the advantage. The forward curve for 2025 points sharply downward, with prices around 4,500 in the November 2025 contract.
Corn (XBH25), -3.10%
The fear of restrictive measures by the coming Trump administration is affecting all agricultural commodities. Ukraine is benefiting from EU free trade terms following the Russian invasion. The market is well-supplied for this year, and the bearish mood is clear.
European corn is under pressure in a clear downtrend with prices well below the 10 (206.67), 20 (208.43), and 50 (210.53) EMAs. The next support from here is 195, last reached in August 2024.
However, the 14-day Relative Strength Index (RSI) reads 32.40 and is fast approaching the oversold area. Historically, values below 30 have produced trend reversals, so short traders should apply proper stop losses approaching the 195 target.
