Technically Speaking

Competing Currencies Mostly Bearish for U.S. Crops

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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Brazil's currency, the real, got a modest boost after September with the election of Jair Bolsonaro as Brazil's new president, but turned lower again in March as economic growth remains sluggish. (DTN ProphetX chart)

Brazil's real:

The April Brazilian real fell more than a half-cent last week, from 26.19 cents to 25.685 cents, plagued by slow economic growth in 2019. As Bloomberg news reported on March 18, economic activity contracted in January and the 6.5% interest rate is not expected to be increased until early 2020. Almost a month ago, Brazil's national statistics agency said GDP was up 1.1% in 2018 with growth of only .1% in the fourth quarter. With such slow economic growth, the real is losing support and turned back lower in March. The lower real benefits Brazil's corn and soybean exports.

Russia's ruble:

The June Russian ruble was up slightly last week, edging up from 1.5235 cents to 1.5290 cents. According to the Moscow Times, Russia's GDP was up 2.3% in 2018, the highest in six years. However, Russia's Economic Development Ministry said the growth is not sustainable. The World Bank is estimating 1.5% growth in 2019 and the International Monetary Fund is expecting 1.8% -- neither of which points to a higher interest rate or higher currency anytime soon. The ruble is currently down 11% from the end of 2017 and will likely encounter resistance near 1.55 cents. A weak ruble helps promote Russian wheat exports.

The euro:

The June euro closed down 0.03 cent last week, ending at $1.1375 on Friday. The euro has traded below its 100-day average since late September and actually challenged the average on Wednesday, but fell back at the end of the week after a manufacturing index showed contraction in the eurozone in March. Earlier in March, the European Central Bank cut its forecast for GDP growth in the European Union from 1.7% to 1.1% for 2019. As fundamentally bearish as that looks for the euro currency, the technical outlook on a weekly chart is actually bullish with downward momentum slowing and the euro finding support at $1.12. A higher euro, if it happened, would help ease bearish pressures on U.S. commodity prices, including wheat. On the other hand, a clear close in the June euro below $1.12, if it happened, would prove the bullish outlook wrong.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities or commodity futures involves substantial risk and are not suitable for everyone.

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