Technically Speaking

Weekly Analysis: Outside Markets

Todd Hultman
By  Todd Hultman , DTN Grains Analyst
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From a technical view, the two weekly charts above look similar as interest rates and diesel prices are both making new highs. However, the reasons for each are different. (DTN ProphetX chart)

Yields on 10-Year T-Notes: The market's interest rate on 10-year T-Notes jumped from 3.06% last Friday to a new seven-year high of 3.225% on Friday, October 5. Helping propel rates higher were the Federal Reserve's recent higher estimate of GDP growth, at 3.1% for 2018, and new highs in the Dow Jones Industrial Average earlier in the week. It also didn't hurt for the Labor Department to peg the September unemployment rate at its lowest level since 1969. Technically speaking, 10-year yields have resumed their two-year uptrend after a three-month pause -- a bearish influence for commodity prices, in general.

Spot New York Ultra Low Sulfur Diesel: Fuel prices have been rising since January 2016 and Friday's close at $2.39 a gallon was the highest this diesel futures contract has seen in nearly four years. Oddly, the weekly chart looks similar to the same one described above for 10-year T-note yields, but for different reasons. Three years of low crude oil prices have taken a toll on world production, and crude supplies are now down 25% from their spring peak of 2017. Economic problems in Venezuela, conflict in Libya, and U.S. sanctions on Iranian oil, due to take effect November 4, are all combining to push fuel prices higher. So far, the 33-month uptrend in diesel prices shows no sign of slowing down.

Spot Copper: Like gold and crude oil, copper correlates well with grain prices, and also offers clues about China and the world economy. Two Fridays ago on September 21, December copper broke above its August high after a response of commercial buying showed spot copper prices have support near $2.60 a pound. Since then, prices have slowly drifted lower and finished at $2.7630 on Friday. Currently, December copper prices are trading in a sideways range between $2.60 and $2.90, suggesting the world economy is still doing well and is showing no significant bearish influence from rising interest rates in the U.S.

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

Follow him on Twitter @ToddHultman

(CZ)

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