Technically Speaking

Weekly Analysis: Outside Markets

Todd Hultman
By  Todd Hultman , DTN Grains Analyst
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The weekly charts of the U.S. dollar index, 10-year T-Note yields, and spot gold reflect major changes taking place in the world that have bearish implications for grain prices. (DTN ProphetX chart)

U.S. Dollar Index: The U.S. Dollar Index closed up 1.26 points for the week ending June 15 at 124.79, back near its highest price in 11 months after the Federal Reserve raised the federal funds target by a quarter-percent on Wednesday and indicated two more hikes were coming before the end of the year. Happening at a time when other major economies are not being pressured to raise rates, the current dynamic has pushed investors into the U.S. dollar the past two months and the trend is likely to continue.

U.S. 10-Year T-Note Yields: For the past eight months, 10-year T-note yields have been working steadily higher, supported by consistent growth in the U.S. economy with no fallout seen from trade disputes yet. At 2.92% and rising, 10-year yields are near their highest levels in more than four years. The 2013 high of 3.04% was broken briefly in May, but remains a long-term level of resistance. Currently, it is not clear if the economy is strong enough to sustain yields above 3.04%, but if it were, grain prices would likely suffer more from a higher U.S. dollar.

Gold: Spot gold prices fell $23.50 in the week ending June 15, to $1,274.60, their lowest close in more than five months. The trend in gold actually turned lower on May 1, but Friday's close took prices even lower after traders absorbed Wednesday's rate hike news and this week's new agreement between the U.S. and North Korea. Both gold and crude oil prices have a history of high correlation to grain prices. While this summer's grain prices will be largely attuned to changes in weather, the economic backdrop for grain prices is turning more bearish.

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Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grains and grain futures involve substantial risk and are not suitable for everyone.

Todd Hultman can be reached at Todd.Hultman@dtn.com

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