On May 30, the June and September 2017 British pound generated short term sell signals. As this report is being compiled on June 9 after the surprising election in the United Kingdom on June 8, the pound is trading sharply lower with the June contract down 2.18 cents or -1.68% and thus far in trading has made a new low for the move of 1.2638, which is the lowest print since 1.2568 made on April 18.
Based upon the results of the election, many analysts anticipate a soft Brexit, which may cushion the fall of the pound. For the September contract to generate an intermediate term sell signal, the high of the day must be below OIA’s key pivot point for June 9 of 1.2652. In previous notes we recommended that clients liquidate positions prior to election day and we continue to recommend a stand aside posture. The volume traded on June 9 is heavy as would be expected and we think there will be an opportunity in the not-too-distant future to initiate bearish positions.
From the May 30 note on the pound:
“The pound is likely to be extremely volatile between now and next Thursday when the Prime Minister will attempt increase her majority. If trading the pound, we recommend liquidating the position prior to Thursday’s election. As we said in yesterday’s note, we expect a rally lasting 1-3 days and this is the opportune time to initiate bearish positions if you are so inclined. Again, all positions should be liquidated prior to Thursday’s election.”
From the May 26 note on the pound:
“Currently, the September contract is trading below the 20 day moving average of 1.2933 and we tend to think this will be a significant point of resistance. It is trading above the 50 day moving average of 1.2737 and the 100 day moving average of 1.2566. The 200 day moving average stands at 1.2618. Although, the daily moving averages are in a bullish set up, we think this is about to change.”
“Looking at the longer-term moving averages, the setup is distinctly bearish. The 20 week moving average stands at 1.2597, 50 week, 1.2703 and the 100 week moving average stands at 1.3775. The monthly moving averages reflect the same bearish set up with the ten-month moving average standing at 1.2667 and the 20 day moving average of 1.3555.”
“In summary, longer-term the setup for the pound is bearish and we expect that after a 1-3 day rally, which we think will be rather weak, the pound will turn lower. One mitigating factor against substantial bearishness is the seasonal tendency for the pound to bottom during the month of May and rally through June and July, then turn lower in August. We tend to think this pattern will not play itself out in 2017.”
Copper: July and September 2017 New York copper will generate intermediate term buy signals on June 9 after generating short term buy signals on May 22.
July copper advanced 5.80 cents on heavy volume of 151,276 contracts. Total open interest increased by 4,415 contracts, which relative to volume is approximately 15% above average. This indicates that new buyers were aggressively moving into New York copper contracts and driving July to a high of 2.6175.
The COT report released last Friday revealed that managed money liquidated 432 contracts of their long positions and also liquidated 17 of their short positions. Commercial interests liquidated 219 of their long positions and also liquidated 984 of their short positions. As of the May 30 tabulation date, managed money was long copper by a ratio of 2.60:1, down fractionally from the previous week of 2.61:1, but above the ratio two weeks ago of 1.94:1.
The daily moving averages on the continuation chart have a bearish tilt with the 20 day standing at $2.5686, 50 day of 2.5730, 100 day 2.6197 and the 200 day stands at 2.4797.
The weekly moving average shows a potentially bullish set up with the 10 week standing at 2.5753, 20 week of 2.6221, 50 week 2.4360, 100 week 2.3172.One of our favorite moving average crosses is the 10 and 30 week moving average and on the continuation chart, the 10 week stands at 2.5753, which is below the 30 week of 2.6067.
The 10-20 long term monthly moving average on the continuation chart is in a bullish setup with the 10 month standing at 2.5121 and the 20 month of 2.3276.
In summary, the nearby copper contract must stay at an elevated price for an extended period of time for the bearish moving averages to move into a bullish set-up. On a seasonal basis, copper has a tendency to bottom in early to mid June and advance during the month of July.
As this report is being compiled on June 9, the July contract is trading 4.00 cents above yesterday’s close or +1.53% and has made a daily high of 2.6520, which is the highest print since 2.6630 made on May 2. For those of you who prefer to trade copper without leverage, the ETF JJC is a terrific vehicle and tracks the price of copper futures closely.
July corn advanced 1.00 cent on heavy volume of 825,620 contracts. Volume declined from June 7 when record-setting volume of 1,090,830 contracts was traded as the July contract advanced 7.50 cents and total open interest increased by a healthy 26,325 while the July contract lost 57,455 contracts.
On June 8, total open interest increased moderately, up 3,314, which relative to volume is approximately 80% below average. The July contract lost 32,431 of open interest. Corn has experienced three days of price advances and three days of total open interest increases. As we pointed out in yesterday’s note, this confirms that short-sellers are not capitulating, and this could send corn futures sharply higher if there is a major weather event.
On June 7, OIA announced that July and September 2017 corn generated short and intermediate term buy signals. In yesterday’s note, we suggested that clients wait for a correction to the 3.75-3.78 area to enter bullish positions. The dollar index is getting close to generating a short term buy signal and if it experiences continued firmness, this could have a dampening effect on corn prices. Continue to stand aside.