2023 Commodities Forecast by Solidecn.com

[Solid ECN]

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US100​

• US indices finished yesterday's trading higher with all major Wall Street indices adding 1% or more. S&P 500 gained 1.42%, Dow Jones moved 1.00% higher and Nasdaq jumped 1.79%. Russell 2000 gained 1.08%​
• Nasdaq gained over 20% off December low and has entered a technical bull market.​
• Indices from Asia-Pacific trade mostly higher. S&P/ASX 200 gained 1%, Kospi added 0.6%, Nift 50 moved 0.8% higher while Nikkei dropped 0.6%​
• Indices from China traded 0.2-0.5% higher​
• DAX futures point to a higher opening of the European cash session today​
• Fed Chair Powell has reportedly told Republican Representatives that Fed expects 1 more rate hike in 2023​
• ECB Schnabel said that banking troubles may have a disinflationary effect. On the other hand, she warned that labor costs indicate possibility of second round inflationary effects​
• Fitch noted that there were 14 sovereign default events since 2020, compared to 19 sovereign default events in whole 2000-2019 period​
• Chinese premier Li Qiang said that his country will strengthen macro policy adjustments and act to boost consumption and investments​
• UK car production increased 13.1% YoY in February as supply chain pressures eased. This was the first monthly increase in output in three months. 81% of all cars produced in UK were exported, with EU being main destination​
• New Zealand's building permits slumped 9% MoM in February. On annual basis drop reached 29.2% YoY​
• Major cryptocurrencies trade mixed - Bitcoin gains 1.2%, Ethereum adds 0.1%, Dogecoin drops 0.7% and Ripple trades 3.6% lower​
• Energy commodities trade mixed - oil gains around 0.3% while US natural gas prices drop 1.7%​
• Precious metals trade mostly higher - silver adds 0.7%, platinum trades 0.8% higher and palladium gains 0.6%. Gold trades flat​
• AUD and JPY are the best performing major currencies while USD and EUR lag the most​

Nasdaq-100 (US100) trades around 20% above the December 2022 low and therefore has entered a bull market, at least from a technical point of view. However, for any larger upward move to be delivered, a break above a psychological, mid-term resistance zone in the 13,000 pts area would be required.​

 

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DE30​

German retail sales data for February was released today at 7:00 am BST. Report was expected to show a 0.5% MoM increase as well as 5.1% YoY drop in retail sales. However, actual data turned out to be much worse than expected with monthly data showing a 1.3% drop and annual data showing 7.0% YoY plunge. DE30 ticked lower following the release while EURUSD saw a minor uptick.

DE30 dipped after miss in German retail sales.​

 

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Gold​

Precious metals are trading a touch lower on the day after erasing earlier gains. Higher-than-expected reading of the French CPI this morning has taken some steam off the precious metals. Gold, as well as silver and platinum, may experience higher volatility following the release of European CPI reading for March (10:00 am BST) and US PCE reading for February (1:30 pm BST).

Taking a look at GOLD at the H1 interval, we can see that bulls attempted to push precious metal's price above the $1,985 resistance zone this morning. However, the attempt turned out to be a failed one and gold started to pull back. Should the ongoing pullback deepen, the first support to watch can be found in the $1,970 area, marked with previous price reactions as well as 50- and 200-hour moving averages. Overall, gold is trading sideways in a triangle pattern and direction of the next big move may be determined by direction of the breakout from this pattern.​

 

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US100​

It seems that we may be ending the downward phase on Wall Street, given the more than 20% rebound from the bottom. The US100 is having its best quarter since Q2 2020! In fact, if it weren't for the high inflation problem in February and then the banking crisis in March, then the US100 could even be above 14,000 points. Currently, the goal of investors will be to break through the area of 13450 points, where the range of the previous similar correction is located, and 13700 points, which are the peaks of the previous correction as well.

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Oil​

• Output cut came as a surprise as media reports prior to the weekend hinted that OPEC+ JMMC will likely recommend to keep output unchanged at a meeting today​
• Indices from Asia-Pacific traded mixed today - Nikkei and S&P/ASX 200 gained 0.5% each while Kospi dropped 0.2% and Nifty 50 traded 0.1% lower. Indices from China traded up to 1.2% higher​
• European and US index futures trade slightly below Friday's cash closing prices​
• Goldman Sachs updated oil price forecasts following a surprise OPEC output cut. The Bank now expects Brent price of $95 per barrel in December 2023 ($90 prior) and $100 per barrel in December 2024 ($97 prior)​
• ECB De Guindos said that while headline CPI in euro area is likely to fall this year, core inflation will likely stay firm. ECB members said that European banking sector is robust and that there is ample liquidity in the sector​
• Fed's Waller said that recent data shows that inflation can be brought down with causing damage to the labor market​
• Chinese Caixin manufacturing PMI dropped from 51.6 to 50.0 in March (exp. 51.7)​
• Australian building permits increased 4.0% MoM in February (exp. -2.6% MoM)​
• Cryptocurrencies are trading lower. Bitcoin drops 1%, Ethereum trades 0.4% lower while Dogecoin and Ripple dip 1.8%​
• Precious metals are pulling back amid USD strengthening - gold and platinum trade 0.9-1.0% lower while silver drops almost 2%​
• USD and JPY are the best performing major currencies while NZD and EUR lag the most​

A surprise output cut from OPEC triggered a spike on the oil market. WTI (OIL.WTI) launched a new week near the $81.20 resistance zone, marked with the upper limit of previous trading range as well as the upper limit of the Overbalance structure. However, bulls failed to break above it on the first attempt.​

 

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Gold​

• OPEC+'s surprising decision to cut production has lifted oil prices. OIL.WTI quotations jumped above the $81 level.​
• Germany's DAX tested Friday's highs, but ultimately closed the day 0.3% lower. In turn, we saw slight increases in France, where the CAC40 added 0.32%, or the UK, the FTSE100 gained 0.54%.​
• Gold is doing quite well on Monday, with the precious metal's quotations rising less than 1% and approaching once again the $2,000 barrier, which should be seen as short-term resistance. ​
• Treasury bonds are gaining on a wave of manufacturing ISM data, which eased concerns about lingering inflationary pressures in the U.S. and overshadowed the potential impact of OPEC+ oil production cuts on another jump in the economy's goods and services prices. U.S. TNOTE's and German BUND's are both gaining more than 0.3% in today's session.​
• US industrial activity indicators published today came in below expectations. Both the PMI and ISM readings showed that actuality in the sector is declining. ​
• Looking at the forex market, we can observe weakness in the US currency. The EURUSD pair even managed to go above 1.0900, but we are seeing a slight pullback in the evening hours. Nevertheless, the main sentiment on the pair remains upward in the medium term.​
• The crypto market did not show any decisive direction today. The major digital currencies are trading mixed. In the evening hours, bitcoin remains in the regions of the reference level.​

GOLD quotes are currently testing resistance stemming from the line drawn after the recent tops. If pierced above, resistance at the $2,000 level may be tested. In turn, its crossing may lead to the generation of another upward wave.​

 

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Dogecoin - Chart of the Day​

Dogecoin saw massive moves yesterday in the evening, with the coin rallying around 30% in less than 2 hours. While other cryptocurrencies also saw some gains, none experienced as big a jump as Dogecoin. It should not come as a surprise as a trigger for the move higher was Dogecoin-specific. Elon Musk changed Twitter's logo to Shiba Inu dog, a 'logo' of Dogecoin and its supporters. The move triggered an instant rally in Dogecoin, sending it to the levels not seen since early-December 2022. Musk himself explained that he is simply delivering onto promise he made in a tweet some time ago that he will buy Twitter and change its logo to Dogecoin logo.

Taking a look at the Dogecoin chart at the D1 interval, we can see that the strong upward move launched yesterday in the evening is continuing today. While price erased some of initial gains yesterday, Dogecoin bulls regained ground today and are pushing the coin towards the 0.10 area. A point to note is that the price of cryptocurrency managed to break above a mid-term support zone in the 0.0890 area, marked with previous price reactions as well as the downward trendline. A break above this area brightened technical outlook for the bulls and a test of the resistance zone ranging below 0.11 handle cannot be ruled out in the coming days.​

 

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Morning Wrap - TNOTE ​

• Wall Street indices ended yesterday's session mostly lower. Investor sentiment was weighed down primarily by macro data readings and comments from the Fed's Mester, which point to a slowdown in the US economy.​
• The S&P 500 fell 0.25%, the Dow Jones gained 0.24% and the Russell 2000 small-cap index lost 0.99%. The Nasdaq index of technology companies was the weakest performer, losing 1.07%.​
• With the specter of a global recession widening, US 10-year government bond yields are under particular scrutiny by investors, having fallen to their lowest level since September 2022 (3.29% zone). Currently, the money market sees a 48% chance of a 25 basis point hike by the Fed at its May meeting and a 52% chance of keeping rates unchanged.​
• Asia-Pacific indices traded mostly lower - the Nikkei fell 1.3%, the S&P/ASX 200 lost 0.4%, the Kospi lost 1.32% and the Nifty 50 traded 0.15% higher.​
• In the FX market, we are seeing capital outflows to safe haven currencies, i.e. the US dollar and the Japanese yen, among others. The EURUSD pair is recording slight declines and breaking out below the support zone at 1.09. At the moment, pairs linked to the currencies of the antipodes are recording the biggest declines.​
• China plans to cut tax burdens and fees totaling CNY1.8 billion for the corporate sector.​
• China's Caixin PMI index for services recorded an increase and came in at 57.8 (55 was expected, previously it was 55).​
• Former BOJ banker Kazuo Momma commented that the Yield Curve Control mechanism may be terminated this month.​
• China may ban exports of technology used to produce high-performance rare earth magnets.​
• Energy commodities are posting moderate declines this morning. WTI crude oil is losing 0.5%, while natural gas is down 0.4%.​
• Gold is slightly decelerating from its recent upward impulse and is currently consolidating in a zone near 2013 USD. UBS raised its target price for gold at the end of March (2024) to $2200 (previously $2100)​
• There is mixed sentiment in the cryptocurrency market. Bitcoin is currently losing nearly 0.5%, while Ethereum is down 1.16%. On the other hand, smaller projects such as Maker and Iota are gaining more than 3.5%. ​

Weak macroeconomic data and in-between comments from Fed bankers, which indicate that given the high economic and systemic uncertainty, the rate hike cycle may be coming to an end, are bolstering sentiment in the debt market.​

 

[Solid ECN]

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Bitcoin​

Cryptocurrencies are retreating from recent record highs as the sell-off on the Nasdaq gains strength and concerns around a slowing US economy have increased. A weakening consumer could mean lower risk appetite and a narrower range of potentially interested buyers of speculative assets. A recession would likely do nothing good for the crypto market. With its declining reaction in recent days, bitcoin has confirmed that its role as a recession or banking crisis hedging asset is still uncertain. Is the king of cryptocurrencies in for a trend change?

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A change in the crypto trend?​

The on-chain market sentiment vector is pointing to levels close to greed, which could signal an impending correction. It's also worth noting that BTC's volatility has been drying up in recent days, which has historically heralded an imminent, sudden price movement.

Looking at the chart of BITCOIN on the D1 interval, we can see that the RSI indicator has risen since the beginning of the year, but since then it has been recording lower and lower levels, although the price of the largest cryptocurrency has been steadily rising. This phenomenon is called a bearish divergence, and it can signify the weakening strength of buyers and a change in the trend. The closest support level for declines is the 23.6 Fibonacci retracement of the upward wave initiated on March 11, when the cryptocurrency rebounded sharply amid the collapsing SVB.​

 

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DOGECOIN​

• Wall Street finished yesterday's trading higher as market odds for Fed rate hike in May dropped following another streak of disappointing data from US jobs market​
• Market now sees around 50% chance of 25 bp rate hike in May and around 50% chance of Fed leaving rate unchanged and pausing rate hike cycle​
• S&P 500 gained 0.36%, Dow Jones traded flat, Nasdaq rallied 0.76% and Russell 2000 moved 0.13% higher​
• Indices from Asia-Pacific traded higher today - Nikkei gained 0.1%, Kospi added 1.3% and indices from China traded up to 0.8% higher​
• Liquidity during today's European trading session is expected to be very thin as majority of stock exchanges from the Old Continent will be shut in observance of Good Friday​
• Japanese household spending increased 1.6% YoY in February (exp. 4.2% YoY)​
• Major cryptocurrencies trade mixed - Bitcoin drops 0.1%, Litecoin gains 0.1%, Ethereum trades 0.3% higher and Dogecoin slumps 2.8%​
• AUD and NZD are the best performing major currencies while JPY and CAD lag the most​

DOGECOIN is one of the worst performing cryptocurrencies today. The coin has almost fully erased the price jump triggered by Elon Musk changing Twitter logo to Shiba Inu.​

 

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Ethereum​

Sentiment in the cryptocurrency market remains mixed, with major projects moving in a sideways trend. Investors are concerned that Ethereum's correction after the Shapella upgrade will result in more sell-offs.

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What after the Shapella Upgrade?​

• Since December 2020, investors have been able to deposit their ETH on the Ethereum Beacon chain and receive blockchain rewards and profits. However, they couldn't withdraw those funds until the recent upgrade. So far, the declines after the Shapella are relatively small;​
• Before the update, all staked ETH was worth nearly $32 billion (about 15% of supply). According to K33 Research, even with small withdrawals, about $2.4 billion in ETH could hit the market as investors will want to withdraw some funds from the Beacon chain. With crypto market liquidity drying up, this could trigger a deeper correction;​
• On the other hand, Bernstein Fund analysts pointed out that of the 18 million ETH staked, nearly 70% were locked into liquidity protocols, allowing investors to de facto trade funds through decentralized Lido-type protocols, which will take off much of the downward pressure. ​
• According to analysts, the 30% of investors who deposited ETH in the Beacon chain without using liquidity protocols are likely to have the highest level of conviction and will not be willing to sell. It is also worth noting that the seamless ability to deposit and withdraw ETH may encourage more investors to staking and drive capital flowing into the chain;​
• Passive ETH returns of 5 or 6% per year are no longer as attractive compared to the 0 interest rate period, when investors could not count on comparable yields from regulated fixed income assets. In addition, staking is to some extent subject to risks associated with crypto market regulation. Rewards for ETH staking will decline as the number of stakers increases.​

News​

1. According to the Block 'open interest' report, the ETH options market (call options vs. put options) before the update showed the highest level since May signaling possible downward pressure​
2. The U.S. Treasury Department has indicated that the decentralized asset market poses a threat to national security.​
3. Divly revealed a report according to which only 1.62% of US cryptocurrency holders paid tax on their investments. The report is disputed by tax law specialists;​
4. According to Bloomberg, Singaupur's central bank is working to unify cryptocurrency-friendly regulations ​
5. According to a survey by CoinGecko and Blockchain Research, 75% of cryptocurrency investors hold NFTs​

Ethereum chart, H4 interval. Looking at the chart, we can see that the price reached before the Shapell update was roughly similar to the peak of the price rally before the Ethereum Merge. If the declines accelerate the key for the price could be the demand reaction around $1700 zone, where we can see SMA200 (red line), 23.6 Fibonacci retracement of the upward wave started last June and previous important price reactions.​

 

[Solid ECN]

Gold ​

Gold is lower by about 0.6% from the perspective of the first session of the week. It is the first trading day for gold after the release of NFP jobs data from Friday when the market for gold was closed. Data from the US labor market showed that a rate hike from the Fed in May is still in the game. The data showed a further strong rise in employment above 200k and a decline in the unemployment rate to 3.5%. From the perspective of monetary policy in the US, inflation data due for release on Wednesday will be crucial. Although wages data decreased more than expected, it is still inconsistent with the inflation target of 2%.

In response to good data from the US, gold reacted to a stronger dollar (USDJPY). Gold opened with a bearish gap that later was closed. Gold is currently trading below $2,000 an ounce. There is a support of around 1985 USD per ounce that is confirmed by 50 period SMA and the upper limit of the triangle pattern.​

 

[Solid ECN]

Oil​

Oil prices are stabilizing after the big price jump last week in response to OPEC+ decided to further cut production. The volatility decreased significantly as demand uncertainty in China and US offsets OPEC+ production cut. Of course, we could notice a further inventory draw last week but perspective of future demand is cloudy as the chance for the next interest rate hike is increasing.

As we can see the price range from the Monday a week ago is less than 3 dollars. The most important support is at 79.00 USD per barrel that is also a higher limit of bullish gap. On the other hand the nearest resistance lies at 82 USD per barrel that is also a higher limit of consolidation that starter on 1st December. In case of breaking the mentioned support, the price may decrease even to vicinity of 75 USD per barrel which is also a lower limit of the bullish gap.​

 

[Solid ECN]

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Bitcoin Jumps above $30,000​

Sentiment towards cryptocurrencies following Easter holidays is positive with major coins as well as smaller altcoins trading higher. Bitcoin is drawing a lot of attention today as the coin is testing a psychological $30,000 area and is trading at the highest level since early-June 2022. Bitcoin has already gained more than 90% off the early-November 2022 low. A near-term level to watch is the resistance zone ranging below $31,500, which marked the upper limit of a short-term trading range in May-June 2022.

BITCOIN trades above $30,000 for the first time since June 2022.​

 

[Solid ECN]

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DE30​

European stock market indices launched the first cash trading session after Easter break higher. Blue chips indices from Western Europe trade 0.5-1.0% higher, following an upbeat Asian session earlier today. However, part of gains has been erased already with DAX dropping back below 15,700 pts. Taking a look at DAX futures at H1 interval (DE30) we can see that bulls failed to break above 15,900 pts area and a double top has been painted. Today's bullish price gap has been filled already and should ongoing pullback deepen further, the 15,650 pts support zone will be the first potential target for sellers. This zone is not only marked with previous price reactions but also with the neckline of the aforementioned double top. Textbook range of the downside breakout from this pattern shows a possibility of a drop to as low as 15,360 pts.

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NATGAS​

US natural gas prices (NATGAS) trade around 2.5% higher today. NATGAS has already jumped more than 10% off the Thursday low. New set of weather forecasts for the United States can be named as a reason behind improved sentiment towards natural gas this week. As one can see on the image below, a new set of forecasts (issued on April 10, 2023) shows that temperatures in many US states, including the key Midwest heating region, are expected to be below-average in the next 8-14 day period. Above-average temperatures are only expected to hold in the southern states while forecasts issued on April 3, 2023 were for above-average temperatures in almost all across the United States.

Taking a look at NATGAS chart at H1 interval, we can see that the price climbed to and tested $2.24 per MMBTu resistance zone today, marked with previous price reactions and a 23.6% retracement of the downward impulse launched in early-March 2023. However, the first attempt to break above it turned out to be a failure.

Weather outlook for the United States grew colder over the past week (April 3 forecast - left, April 10 forecast - right).​

 

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US Index​

US Dollar weakened after International Monetary Fund's (IMF) global economy outlook report, and the current US situation at the Washington summit was also commented by US Treasury Secretary Janet Yellen. The content of the commentary was in line with what today's Axios analysis and didn't surprised financial markets. Yellen emphasized the resilience and strength of the U.S. economy and the stability of the banking sector but the comment failed to help the dollar index (USDIDX).

The situation in the US economy was again commented on by John C. Williams, head of the New York Fed. The dollar index is weakening as investors following the IMF analysis saw the Fed's rate hike cycle coming to an end which may herald the lack of significant support for the dollar's strength that has been building since 2022, with US systemic uncertainty in the background. Although the chances of a hike in May increased after the NFP data, its fate is still uncertain and its impact on USD strength almost 'theoretical'.
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IMF​

• IMF head of markets research Gourinchas conveyed that the Fed, the European Central Bank and the Bank of England are nearing the end of their rate hike cycles;​
• The IMF expects U.S. economic growth to reach 1.6% in 2023, compared to the 1.4% estimated in January, and 1.1% y/y growth in 2024 (a staggered slowdown).​

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Yellen​

• The banking system in the United States is healthy, with strong capital and liquidity positions, the global financial system is resilient;​
• Given the war in Ukraine and recent pressures on banking systems, we remain cautious on inflation risks;​
• Price pressures in the United States remain excessive, but have declined over the past six months.​

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Fed Williams​

• I don't think we need to change our balance sheet policy in the near term. QT is proceeding at a rapid pace;​
• The banking system has really stabilized after the last crisis. If inflation falls, we will have to lower interest rates.​
• One more rate hike is reasonable but we will watch the data including retail sales and CPI inflation;​
• If inflation becomes more persistent, we will have to adjust policy accordingly;​
• Bank failures have increased uncertainty about the outlook. We need to see a decline in core inflation;​
• We have brought policy to a restrictive level. The impact of the credit turmoil in the banks is uncertain and it is too early to estimate its impact.​

USDIDX chart, H4 interval. The dollar index reacted by falling below the 38.2 Fibonacci retracement of the wave started in Q1 2021, near 105 points. Since mid-March, when investors learned the extent of the banking sector's problems, the bulls have had a clear problem with rising above the SMA100 (black line).​

 

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Solana​

The Solana is gaining 12% today, thanks to Thursday's scheduled launch of the Saga phone, running Android powered by Solana's blockchain. Solana developers can create decentralized financial applications (DeFi) and token projects (NFT) on its blockchain. The rally supported Bitcoin's rise above $30,000, which sent a bullish signal for the entire crypto market. Nevertheless, altcoin's gains remain somewhat muted:​

• Solana's rapid rise was supported by liquidations of $2.7 million worth of short positions on the contracts. The market expects the Saga smartphone to allow users to create their own NFTs from anywhere and access an ecosystem of Solana-based applications and projects driving adoption. The estimated price of the device in June is expected to be around $1,000;​
• The total blocked value (TVL) in DeFi applications increased by nearly 40% from $208 million in Q1 2022 to $294 million according to DeFiLlam. It is worth pointing out that the increase came at a very difficult time for the cryptocurrency market as a whole. On the other hand, however, the volume of NFT token trading fell from around $30 million in January to $20 million in March​

Weekly trading volume of NFT tokens on Solan.

SOLANA chart, H4 interval. The price of the cryptocurrency has climbed above the SMA200 and the 23.6 Fibonacci retracement of the December 2022 downward wave. Bulls may want to test $26 level, which indicates the local peaks after the cascading sell-off caused by the collapse of FTX.​

 

[Solid ECN]

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US500​

Today, investors' attention turns primarily to the US CPI inflation report, which, along with the labor market data we have learned, will be a major factor in determining what the Fed will do at the next FOMC meeting in May.

Analyst consensus assumes that the headline reading for CPI inflation will drop significantly, coming in at 5.2% y/y versus the last reading of 6% y/y. The opposite is true for core inflation, which is expected to rise to 5.6% y/y vs. the last reading of 5.5%. While the headline reading is highly likely to show a decline (due in part to the high base effect), the core reading remains less certain.

The standard deviation of the consensus compiled by Bloomberg is close to 0.1%, and the analysts themselves mathematically lean more in favor of the scenario of keeping inflation unchanged/increasing to 5.6%.

How will the market react? A lower inflation reading may support market bulls, who will react positively to the resulting lower reading lowering expectations for a continuation of the interest rate hike cycle. On the other hand, however, if inflation remains high and the underlying reading manages to surprise the consensus with a reading significantly above the expected value, markets on Wall Street may react with declines, in the face of condensed uncertainty stemming from weak macro data, the prospect of further tightening and the deepening specter of recession.

From a technical point of view, the US500 index remains in the zone outlined by medium-term trend patterns, which in the past have been important zones of support and resistance. The reaction to today's data and the Fed's Minutes reading scheduled for this evening may determine the future direction of this market.​

 

[Solid ECN]

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NATGAS​

US natural gas prices took a hit yesterday as analysts mounted their calls that the end of the heating season in the United States is near. While recent weather forecasts pointed to a period of below-average temperatures, average temperatures in this period of the year are usually high enough for demand for heating to drop significantly. Expectations for today's EIA natural gas storage report (3:30 pm BST) also strongly hint that the heating season in the US is drawing to close - median estimate is for a 25 billion cubic feet increase in stockpiles. If confirmed, this would be the second inventory build of 2023 and the first one since mid-January.

Taking a look at NATGAS chart at H4 interval, we can see that price has halted recent upward correction at the resistance zone marked with $2.24 handle and the 23.6% retracement of the downward move launched at the beginning of March 2023. Price launched a pullback and move back to the $2.08 per MMBTu. After a few hours of struggle in the area, sellers managed to push the price below the $2.08 mark this morning. Volatility on the NATGAS market is likely to be elevated around 3:30 pm BST when the EIA report is released. Should analysts be mistaken with their forecasts and US natural gas inventories actually drop, NATGAS could see a price spike.​