China has revealed a massive stimulus package, including rate cuts, to boost its sluggish economy, with an impact across all industrial metals.
European Commodity Winners Last Week
Zinc Special Hg Cash (Q3Y00), +7.5%
The latest LME inventories are at 251,425 tonnes, which is a good recovery from the low of 25,325 tones (April 2023) but statistically remains low indicating tight supply.
LME reported funds net positions at +38,154 contracts, which is a substantial number supporting the latest price move. Its forward curve points upwards until May 2025, so this starting trend may have a good run in the next months.
The contract is trending higher (3-month-high) and broke the key 3,000 USD mark this week. Traders will check 3,085 as the closest resistance. If broken, volatility will increase and will confirm a solid uptrend.
Aluminium Hg Cash (P3Y00), +6.76%
The latest LME inventories at 792,950 t mark an improvement from the historical lows from July 2022 (313,000 t), but they still remain very tight by historical measures.
The fund net positions reported by the same exchange are +57,893 contracts, which is average and showing moderate interest.
Positive factors are a weaker dollar among lower interest rates and expectations of further cuts.
The announced stimulus measures by China for the rest of 2024 will keep supporting metals in general.
It is currently trading above the 10-, 20-, and 50-unit exponential moving averages, setting the next bullish target at 2,700 USD.
UK Natural Gas (NFX24)
UK natural gas is marking a seven-week high, mainly fueled by the situation in the Middle East, especially the Israel conflict with Lebanon. Another bullish factor is the current low UK storage. The United Kingdom's natural gas storage was 4.5 terawatts hour (TWh) on July 1, 2024, which is only 45% of its storing capacity.
In contrast, European gas storage is almost 95% full.
This scenario will keep in balance the starting uptrend we have seen. The contract is in recovery mode from the lows of Feb. 19, 2024 (54.89 GBP pence) and is trading above the 10, 20, and 50 EMAs.
This move is significant, since this week the 50 weekly EMA has been broken upwards with a gap, which is a very bullish signal.
The RSI is still at 59 and pointing upwards, indicating possible momentum in the trend.
The historical support is far away, at 55 GBP, and unlikely to be touched this year. Watch out for the next target at 150 GBP if the current breakout keeps the momentum in the next sessions.
European Commodity Losers Last Week
Crude Oil Brent (CBZ24), -2.16%
Surprisingly, the Middle East conflict has not changed the downtrend in oil, which raises many questions. It seems the market is in big trouble on the demand side. China has negative manufacture growth for 5 months in a row, Saudi Arabia is planning to stop the current production cuts in December, and Libya will likely increase output soon.
Recession fears remain for 2025 in the US and Germany is in contraction. That scenario requires a massive supply shock to reverse the downtrend.
The Brent contract is in a downtrend since the start of July 2024. The weekly candles keep below the 10, 20, and 50 EMAs. The key resistance level is the 50 EMA at 75 USD, which has previously been a solid support. The weekly RSI at 42 does not show any strength, and long traders will likely wait for 30 (oversold area) to start long positions.
White Sugar #5 (SWZ24), -2.05%
Sugar is still in a downtrend channel. As a positive factor, drought conditions in Brazil continue, but sugar production there remains stable (Reuters reports 3.12 million mt tons for the first half of September).
India might lift its export limits given the current pressure by exporters. The Indian Sugar Mills Association expects 33.3 mmt in SY25 against 23 mmt in SY24.
Technically, sugar is trading a downward channel where all that matters seems to be the weekly 50 EMA. The forward curve points downward for 2025, reinforcing the current trend.
Prices are touching the 50 weekly EMA (at 585 USD) since December 2023, which has proven a formidable dynamic resistance so far.
The weekly downtrend initiated on November 2023 has to be broken to establish a turnaround.
With strong statistical support at 510 USD, long traders will likely open positions if it returns there in the next weeks.
On the date of publication, Cesar Marconetti did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
