natural gas

A pipeline that runs from texas up the eastern seaboard reported an explosion and fire at a pump station in Pennsylvania. This occurred earlier this morning but the impact on natural gas was not seen until Spectra energy declared force majeure on deliveries from this pipeline.This Pipeline does service parts of North east so  price impact bigger versus when a pipeline explodes in middle of Nowhere.

Plenty of selling today

Spooz gapped open below support level at 2065.5 and has never looked back.Today’s Economic releases were of minor concern.Individual Company’s earnings  had  very limited impact on   broader stock markets.Sentiment is Sour as the Stronger yen  has  Kicked the  Stock bulls in the shins.Stronger Euro in turn weighing on European Stocks prices as well.The downside leaders in europe were  Autos,banks and technology sectors.Maybe some month end selling weighing on prices  but i wouldn’t blame much on that.The  BOJ decision not to provide more stimulus and Stronger Eurozone GDP may indicate that central banks are done or incapable of  providing more Stimulus. Just one thought why  Stocks worldwide are falling out of bed.

Gold,Silver platinum on a tear all week.Treasuries sideways to higher ,I believe  they are being impacted by month end order flow.They are trying to rally but have little luck in staying in the Green.

if spooz can recapture 2065.5 level today might not be a disaster.if it closes below that level   short term trend is down.

Trade Idea AUD

ADM6 Curncy (AUDUSD Crncy Fut  J 2016-04-29 09-09-09

Above is Aussie dollar.the technicals  don’t look all that Bearish,yes it may break a trend line and take out some recent lows, but nothing to  suggest an aggressive short position.What makes it a good sell is  the Stronger yen. I will pick up on the Morgan Stanley commentary to lay out case.if Jpy continues to strengthen it is inevitable for some of the  remaining carry trades to be unwound.This unwinding will weigh on the Aussie.What would give me added confidence for a short position would be if  Iron ore and Copper started to trend lower.This would give added fuel to a move lower in the Aussie. Lastly central bank meets on Tuesday,A good chance they sound  dovish and thus weaker Currency

 

Dollar

currency

here is the 5 day percent changes of Currencies vs. the Dollar.We know about the  JPY s Strength but look at Brazil and Russia as well.great for Commodities and countries that produce them.

reflate or Risk on

The past 24 hours have been a whirlwind of Central bank meetings( NZ,FED,BOJ and Brazil) and release of top Tier data.US GDP missd on headline number but PCE core on aquarterly basis was highest in 4 years.This is an attention getter for the  tresuries. Personal consumption was also better than consensus (down from last Q) indicating the consumer is still propping up the US economy but not at the same pace as last Quarter.Germany out with CPI numbers and they were in line to weak.On a  M/M comparison they  were lower as the headline numbers came in below Zero.

So is it a risk on move? I say  no because if it was the precious metals would not be bid as aggressive as they are.Multi month highs in Silver and  platinum today and Gold trying to break out of a sideways pattern(1273-74 break would do it).See this with firmer stocks and oil makes me believe it is a Reflation trade  and not a Risk On. Fed hinted yesterday at Worries about Growth and Downplayed any worries about Inflation due to no mention of Current strength in oil, steel etc.We know the fed will let inflation run hotter  as they want the recovery to take hold  before raising rates. One other thought out there is that the Fed is worried about Global Deflation   and doesn’t want to raise rates until global inflation moves higher.(per IFR news).Reflate the  commodities  is the focus for trade again today.

The Facebook has saved the tech sector  for now. Earnings were stellar,stock was up some 11%  before Some profit taking set in.facebook well on way to replace as the tech benchmark.

Heating Oil

Some of the Strength in oil can be attributed to strength in HO/Diesel/gasoil.Talk of US exports to latin america heating up and also a few refinery glitches In the USA causing some short-term supply issues.The HO crack spread for june is up $5 since April 6th,Jun/July Calendar spread tighter by 150 ticks as well.This is a situation where  we can see the tightest in the market evident by the Spread movement.We may not know why  but it doesn’t matter there is a tightness in the market that wasn’t there a month ago.

In Europe gasoil Calendar spreads are tighter as well,M/N  has tightened up by $4 since early April, as the contango is  shrunk between the two months.Bloomberg tells us that Cross Atlantic Cargo flows are increasing to take advantage of the tightest in gasoil spreads.

What I find confusing is that a few weeks ago Every Expert was saying we have no room to put the  excess gasoil/Diesel ,We have so much supply we are drowning in it.But yet Crack spreads tighter,calendar spreads tighter and obviously demand stronger.

That is the take away,regardless of reason  is that  Diesel is in demand and it  has  been a leg for Brent oil to stand on.

Soy Beans

Weekly export numbers leaned towards  the bearish Side  But Soymeal  were favorable.remember Argentina the leader in Soymeal exports so as long as US soymeal exports stay strong it  may keep Soybeans buoyant.Weather in argentine is less of concern for next  few days,but some concern in 8-15 day forecast of possibly more rain.The  slowdown in rain is great  but the wetness of the fields is still a concern as farm equipment will struggle with wet ground.Today at 1 :00  we get an update from  Argentine grain exchange on Crop damage.Earlier today the International grain Exchange cut world supplies By 5 million tons,but be aware that world-wide crops  will still be near a record high, for now.

US rain forecasts  show a little more rain for midwest in next 2 weeks compared  to yesterday’s   outlook.

First notice day for may grains is tomorrow.

China rebar trading

Oil loses commodity trade crown to unlikely challenger: rebar – Reuters News
Thu, 28 Apr 2016 10:23:50 GMT
• China Apr rebar turnover overtakes crude: http://tmsnrt.rs/26wzjW1
• China Apr rebar turnover valued at $487 billion
• U.S. WTI crude turnover valued at $479 billion
• But many wary China’s soaring rebar trading will collapse
• And physical oil trading to remain bigger than steel – UBS
By Henning Gloystein and Sonali Paul
SINGAPORE/SYDNEY, April 28 (Reuters) – Crude oil futures, long the king of commodity trading, have lost their dominant position as the world’s most traded and valuable derivative in the resources sector to an unlikely challenger: Chinese rebar.
Soaring volumes as well as a price jump since the beginning of the year have seen Shanghai rebar steel futures SRBc1 move past both major crude benchmarks, international Brent futures LCOc1 and U.S. Texas Intermediate (WTI) CLc1, in April to make it the world’s most traded commodity futures.
In an unprecedented jump, the most traded contracts of Shanghai-based steel derivative traded over 129 million lots of 10 tonnes each to date in April, up from roughly 65 million this month last year.
That put their monthly value at $487 billion, based on average April prices, according to Reuters calculations.
Trading in West Texas Intermediate’s most active contract, the most liquid crude futures contract, was worth around $479 billion in April.
Although analysts said that the spike in rebar trading might be overblown, some felt the steel sector, including raw material iron ore, had the potential to challenge crude’s dominance in the long-term.
“I wouldn’t rule out the (steel futures) market being bigger (than crude) in terms of liquidity,” said UBS commodities analyst Daniel Morgan in Sydney, adding rebar and iron ore trades were “a deep liquid way to express views on the steel sector and the Chinese economy.”And volumes aren’t just rising in China’s steel market, but also its core raw material, iron ore.
“Strong iron ore volume growth has… been accompanied by rising open interest and deepening liquidity across the forward curve, as more industry participants continue to adopt greater use of derivatives for price risk management,” said Adrian Lunt, head of commodities research at Singapore Exchange (SGX).
In China, the steel trading surge comes as huge amounts of speculative money has poured into its commodities markets since the beginning of the year, and especially this month, triggering fears of a bubble and prompting exchanges and regulators to introduce more restrictive trading rules. (nL3N17V09M)
Many analysts, therefore, think that steel’s dominance in the commodities world will be short-lived and that globally traded crude will retake the throne soon.
Besides, crude’s importance as the fuel for global transport ensures its ongoing lead in physical trading.
“Oil is the most important commodity globally for the physical trade. There’s no doubt about that. The physical (steel) trade will never be as large as the physical trade for oil,” UBS’s Morgan said.

FOMC

fed statement opaque( purposefully)  no clear hint a June hike but they did dropped reference to “global economic and Financial Developments  continue to pose risks” They did say that they will still monitor them. This was the reason holding the Fed back from Rate hikes.So if it is removed then it should be clear sailing towards a rate hike. No  chance  fed offset  this by Saying US economic activity has slowed  recently and inflation  has continued to run below feds target.This in the face of  2016 highs in oil and Run up in base metals.

So, Out of the  fed no strong signal of June hike( probabilities up2%) so perceived lower for longer = Risk on  and weak dollar