U.S. grains traded cautiously on Monday ahead of Tuesday's USDA report, while advances seen in global oilseed and vegetable oil futures along with Canadian dollar weakness were viewed as supportive features in Monday's canola trade.
As seen on the attached chart, the May canola contract reached a fresh high for March on Monday, with a gain of $4.30/metric ton, slightly lower than the $4.60 gained in old-crop trading months. The November contract has closed higher in seven of the last 10 trading days, while the new-crop soybean contract is showing signs of fatigue in recent trade with signs of momentum indicators rolling over while near the middle of the neutral zone on the stochastic momentum chart.
Monday's move saw price end above the 61.8% retracement of the move from the January high to March low calculated at $485.20/mt, a move that could clear the path for a further move to the 67% retracement at $487.30/mt (not shown).
The move also resulted in a breach of the last of the major moving averages, the 100-day, calculated at $485.50/mt, the first close above this resistance in more than two months.
The November contract also reached a fresh high for March, while in sight of the next area of chart resistance from $486/mt to $487.60/mt, the last level of resistance preventing a full retracement to the recent January high of $500.10/mt. While the May contract and the November contract have gained 5.4% and 5.5% since their respective March lows, only new-crop is reaching new highs and breaching technical resistance. This is despite pre-report estimates that point to a year-over-year increase in planted U.S. soybean acres in 2020.
Another way of looking at this is the losses faced since reaching the recent January highs. While the old-crop May contract is down $26.40/mt or 5.3% from the January high to the March 30 close, new-crop is down only $14.20/mt or 2.8% over this period.
The lower studies of the chart show trends that bears watching. The blue line on the second study shows the Nov20/Jan21 spread, which has narrowed from minus $7.40/mt as of March 13 to minus $5.30/mt on Monday. This can be viewed as a neutral view of fundamentals when this spread is compared to full carry, pointing to a less bearish view of fundamentals. This spread has narrowed $1/mt in Monday's trade, while is the narrowest spread seen in more than two months.
The blue bars on the lower study shows the size of the noncommercial net-short futures position falling for four straight weeks to 54,272 contracts, the smallest bearish position reported in eight weeks.
Cliff Jamieson can be reached at email@example.com
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