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Geopolitics

💥 Natural Gas Gas Gas 📈Do I have to recap the current geopolitics for you? Germany is navigating to its black-out because the gas supply from Russia is being capped (stupid German politicians but okay). Because of the lack of nuclear energy, the Europeans will have a certain electricity problem - at least Germany in the coming winter. So, they will import US natural gas on a large scale. That's the story in a nutshell. The FED and ECB have bloated the circulating money so that some inflation will play its part too. Looking at the technicals: We are about to break this triangle formation to the upside. If this breakout gets confirmed, I'm expecting perhaps a re-test of the trendline or breakout level and then a further upward move. According to the seasonality of the last ten years, Natural Gas has the first spike at the end of April , after this a little bit higher after the middle of May before dropping hard at the beginning of June . Honestly, I don't know if the seasonality in these global circumstances plays a dominant role. It depends on how strong the inflation kicks in. So I'll decide later if I exit my position in May or if I hodl until October/November. No investment advice - just my 2 cents on this topic. ;)
NYMEX:NG1!Long
by p4917
5
USDCNH Update - Major Breakout UnderwayIf you bought this pair when I first featured it here, you have made money. If you were leveraged 50:1 - which - often is the case in forex, you have likely returned more (% returned) in this trade than what you can expect in three years of investing in a vanilla benchmark-tracking 401K. I remain long USDCNH and will continue to cover it for the foreseeable future. Something to consider: such a rapid deterioration of the Yuan is reason to speculate the Chinese economy is becoming increasingly decoupled from anything that resembles the last 10-12 years of price action. For example, if the Yuan were to surpass $7.20, I would start to suspect two possible (again I can't "predict" anything) situations: 1. The Chinese economy in severe distress (hopefully not). 2. Intentional disregard for participation in the global economy, as it exists currently (hopefully not). Again, we are not there YET; all we can do is read the chart and analyze information / data as it becomes available. Pray for peace. God Bless
Long
by ChiefMacro
Energy & Inflation - The Chickens Come Home to RoostThe worldwide pandemic gripped the markets two years ago, throwing the global economy into a brief tailspin. In hindsight, the decline in markets across all assets seems like the blink of an eye. At the time, it felt like an eternity. Crude oil explodes and becomes very volatile Natural gas at an unseasonal high Coal reached a new record peak US energy policy lit the fuse Ukraine and inflation are pouring fuel on the fire Energy demand evaporated, sending landlocked NYMEX crude oil below zero for the first time since trading began in the 1980s. Seaborne Brent petroleum fell to the lowest price of this century at $16 per barrel. Natural gas dropped to a twenty-five-year low at $1.432 per MMBtu, and coal prices fell under $40 per ton. Central Bank liquidity and government stimulus that stabilized the economy ignited a recovery that began lifting prices. Two years later, the meltdown turned into a melt-up as raging inflation and the first significant war on European soil since World War II turned one crisis into another. The chickens came home to roost in the energy markets as prices went from famine to feast for producers and feast to famine for consumers. Crude oil explodes and becomes very volatile In March 2022, crude oil rose to the highest price since 2008 and blew through the $100 per barrel level as a hot knife goes through butter. The monthly chart shows that after probing above $100 in late February, nearby NYMEX crude oil futures rose to $130.50 in March, before pulling back to just below the triple digit price at the end of last week. The quarterly chart shows that the energy commodity rose for the eighth consecutive quarter in Q1 2022. Nearby Brent crude oil futures, the benchmark for European, African, Middle Eastern, and Russian petroleum, exploded to $139.13 per barrel in March before pulling back to the $104 level on the June futures contract. While crude oil corrected from the high, the price has been highly volatile, with $10 daily trading ranges becoming the norm instead of the exception. Natural gas at an unseasonal high The natural gas market moves into the injection season in late March as heating demand declines. March tends to be a bearish time in the natural gas market because of the energy commodity’s seasonality. The monthly chart shows that nearby natural gas futures rose to a high of $5.832 in March, the highest level during the month that ends the withdrawal season since 2008. On April 1, the price was over the $5.70 per MMBtu level, more than double the level at the start of April 2021. Coal reached a new record peak Coal, the fossil fuel that environmentalists consider a four-letter energy commodity, rose to a new record high in March. The monthly chart of thermal coal futures for delivery in Rotterdam, the Netherlands, shows the price reached a record $465 per ton in March before correcting to the $265.40 level. Meanwhile, the price remained above the previous record high from July 2008 at $224 per ton. US energy policy lit the fuse As the energy demand made a comeback from the lows during the second half of 2020, the change in US administrations planted very bullish seeds for fossil fuel prices. The shift in US energy policy was symbolic and real. On his first day in office on January 21, 2021, President Biden signed an executive order canceling the Keystone XL pipeline, fulfilling his campaign pledge to address climate change. Environmentalists and progressive Democrats called the US addiction to hydrocarbons an existential threat. In 2021 and 2022, the administration banned drilling and fracking for oil and gas on Alaska’s federal lands and tightened regulations on hydrocarbon production. All the while, the demand for gas, oil, and coal was rising. OPEC+, the international oil cartel, and its partner Russia maintained production cuts as they received a gift from the US administration. In March 2020, USD petroleum output led the world at 13.1 million barrels per day. The shift in US energy policy to favor alternative and renewable fuels and inhibit hydrocarbon production and consumption handed the pricing power back to OPEC+ on a silver platter. After decades of striving for energy independence, the US surrendered it in a matter of months. As the price rose, the Biden Administration continued to pander to its party’s progressive wing with green energy rhetoric while begging the cartel to increase output thrice. On each occasion, OPEC+ not so politely refused, and the oil price continued to rise. Meanwhile, natural gas and coal shortages pushed those commodities to multi-year highs. The bottom line is that while addressing climate change is a noble cause, it is a multi-decade project. The US and worldwide consumers continue to depend on the hydrocarbons that power the globe. The shift in energy policy planted very bullish seeds where oil wells, gas fields, and coal mines once produced the energy commodities on US soil. An unexpected event made the prices combustible. Ukraine and inflation are pouring fuel on the fire In previous articles before the invasion, we wrote that the February 4 meeting between China’s President Xi and Russian President Vladimir Putin was a “watershed event.” The $117 billion trade agreement was secondary to the “no-limits” support deal. Twenty days after the leaders shook hands at the Beijing Winter Olympics opening ceremony, Russia invaded Ukraine launching a bloody and devasting war that created a massive schism in the geopolitical landscape. Sanctions on Russia, retaliatory measures, and heated rhetoric ignited an explosive fuse in fossil fuel markets. In crude oil, the price rose as Russia is a leading producer. Supply concerns pushed the Brent and WTI futures markets into backwardations where deferred prices were lower than prices for nearby delivery. The price eclipsed the $100 per barrel level for the first time since 2014 and reached the highest price since 2008. Asian and European natural gas prices were trading at much higher levels than the US Henry Hub price before Russia’s invasion. Meanwhile, European natural gas prices exploded to a new record peak in March. The chart of ICE UK natural gas futures speaks for itself with the explosive move to a record peak in March. LNG changed the US natural gas market over the past years, expanding its reach beyond the North American pipeline network. LNG now travels the world by ocean tankers, making US domestic prices more sensitive to worldwide levels. In the wake of Russian aggression and European sanctions, Europe is attempting to wean itself from its addiction to Russian natural gas, increasing the need for US LNG imports. The increase in demand has put upward pressure on US natural gas prices and downward pressure on inventories, which were over 14% below the five-year average for the week ending on March 25, 2022. In the coal market, China and India have had a healthy appetite for the dirtiest fossil fuel. Moreover, rising oil and natural gas prices put upward pressure on coal, a less expensive alternative. Meanwhile, rising inflation is causing production costs to rise as labor, equipment, and all other aspects of extracting fossil fuels and all commodities from the earth’s crust have skyrocketed. Rising energy prices are a root cause of increasing inflation, but it has become a vicious cycle that also impacts energy output costs. The February US inflation data ran at the highest level in over four decades. Last week, the US President announced the release of one million barrels per day from the US strategic petroleum reserve. Taping the supplies could run 180 days, making it the most significant use of the SPR in history. Meanwhile, over the past decades, most SPR releases have not pushed prices lower, and some have caused rallies in the oil futures market. US energy policy planted bullish seeds for fossil fuel prices in early 2021. It did not take long for the chickens to come home to roost. Now that consumers are pay $4, $5, $6, and $7 per gallon for gasoline, the administration calls higher prices the Russian President’s fault, a convenient political ploy. The perfect bullish storm in energy began long before Russian troops rolled over Ukraine’s border. The Russian leader and sanctions poured fuel on an already raging inflationary fire in the energy markets. However, US energy, monetary, and fiscal policies were the original arsonists. The base prices for oil, gas, and coal will remain elevated for as long as the eye can see. Buying dips is likely to be the optimal approach to the sector. Since corrections in commodities markets can be brutal, adjust your risk-reward horizons to reflect wide price variance. -- Trading advice given in this communication, if any, is based on information taken from trades and statistical services and other sources that we believe are reliable. The author does not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects the author’s good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice the author provides will result in profitable trades. There is risk of loss in all futures and options trading. Any investment involves substantial risks, including, but not limited to, pricing volatility , inadequate liquidity, and the potential complete loss of principal. This article does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.
NYMEX:CL1!Education
by Andy_Hecht
Bitcoin (BTC/USD) Daily Chart Analysis For April 1, 2022Technical Analysis and Outlook: Since Friday, March 25, Bitcoin's Inner Coin Rally $48,000 and Key Res $47,900 were completed, as shown on Daily Chart Analysis For March 25. The retest of the obsoleted Key Res $44,400 is a very low probability however is alive and well. The push to retest the completed Inner Coin Rally at $48,000 and Key Res at $47,900 and move substantially higher to the next Inner Coin Rally at $54,000 is in the cards.
BITSTAMP:BTCUSD
by TradeSelecter
4
Decline of the US Dollar Means Commodities Will Continue To RoarThe pound sterling, the United Kingdom’s foreign currency instrument, was the global reserve currency in the 19th century and the first half of the 20th century. For decades, the US dollar has been the world’s reserve currency, which became official in 1944 after a delegation from forty-four allied countries decided that the world’s currencies would no longer be linked to gold but pegged to the US dollar, which was linked to gold. The Bretton Woods Agreement established the authority of central banks to maintain fixed exchange rates between their foreign exchange instruments and the US dollar. In turn, the US would redeem US dollars for gold on demand. The redemption option ended in 1971 when President Richard Nixon announced that the United States would no longer convert dollars to gold at a fixed value. The dollar’s link to commodities Three factors that will continue to weigh on the dollar’s global role Expect higher base prices for commodities Long-term trends are very bullish Buying dips is likely to be the optimal approach For seventy-eight years, since the end of World War II, the US dollar has been the king of the currencies. On December 27, 1945, the participating countries signed the Bretton Woods Agreement. On August 15, 1971, President Nixon abandoned the gold standard. On February 4, 2022, a handshake on a “no-limits” support agreement between Chinese President Xi and Russian President Putin may go down in history as the beginning of the end of the US dollar as the leading world reserve currency. The watershed event could have far-reaching consequences for markets across all asset classes. Commodities are global assets. The end of the dollar’s reign as the monarch of money will likely lift raw material prices in dollar terms in the coming years. The dollar’s link to commodities As the world’s reserve currency, the dollar has been the leading global pricing mechanism for most commodities. Over the past decades, a rising dollar often weighed on commodity prices as the essentials became more expensive in other currency terms. A weak dollar encouraged buying as prices fell in different foreign exchange instruments. While the US is the world’s leading economy, the population at around 333 million is only 4.2% of the total number of people on our planet. Therefore, the dollar’s link to commodities is financially based on the US position in the global financial markets and not on the supply and demand equations for the raw materials. If the dollar’s role in the world declines, its link to commodity prices will diminish. Three factors that will continue to weigh on the dollar’s global role King dollar is facing a challenge in 2022 as world economic and political events threaten its dominance. The US dollar faces at least three issues that continue to erode its purchasing power and role in the global economy: Inflation - The February US CPI and PPI data pointed to the highest inflation in over four decades. The March data will be even worse. The Fed began increasing short-term interest rates but remains far behind the inflationary curve. Rising inflation erodes the US dollar’s purchasing power. Geopolitical tensions - The war in Ukraine and China’s support for Russia has dramatically changed the geopolitical landscape. In the leadup to the expansionary move, Russia reduced its US dollar reserves, increasing holdings in euros and gold. Sanctions on Russia will likely cause China to follow the same course. China is the world’s second-leading economy, and Russia is a leading commodity-producing country. As China and Russia move away from using the US currency as a reserve currency, the dollar’s global role will decline. Geopolitical tensions have accelerated the descent. The decline of fiat currencies - The rise of cryptocurrencies is a sign of the fall of fiat currencies. Cryptos derive value from bids and offers for the currencies in an open and transparent market that transcends borders. Fiat currencies derive value from the full faith and credit in the governments that issue the legal tender. Meanwhile, rising commodity prices signify the decline in the dollar’s purchasing power. The dollar index measures the US currency against other world currencies, but it is a bit of a mirage as when all fiat currencies lose value, it is not apparent. The dollar index measures the US currency against other world reserve currencies, including the euro, yen, pound, Canadian dollar, Swedish krona, and Swiss franc. The most significant weighting, at 57.6%, is against the euro currency. The dollar may be moving higher against the basket of currencies, but that does not mean that all of them, including the dollar, are losing value. Expect higher base prices for commodities The decline of the dollar and all fiat currencies makes purchasing power drop and commodity prices rise. Therefore, a strong dollar index has not weighed on many commodity prices over the past year. The weekly chart shows that the dollar index has rallied, making higher lows and higher highs since early 2021. Over that period, most commodities have risen to multi-year and all-time highs. The strength of the dollar did nothing to restrain increasing raw material prices. Meanwhile, higher US interest rates increase the cost of carrying commodity inventories and boost the US dollar’s value against other currencies. The weekly chart of the US 30-Year Treasury bond futures shows the pattern of lower highs and lower lows, pushing long-term interest rates higher. The bottom line is that a rising dollar and increasing US interest rates have not stopped commodity prices from rallying since early 2021. Higher interest rates, rising inflation, geopolitical turmoil leading to supply chain issues, and sanctions that interfere with many raw materials supply and demand equations mean that production costs are rising. The base prices for raw materials are moving higher. Long-term trends are very bullish Bull markets rarely move in straight lines, and since commodities are highly volatile assets, corrections can be brutal. However, the long-term charts in four leading commodities, copper, crude oil, corn, and gold, display the same bullish patterns. The quarterly chart of COMEX copper futures shows the bullish pattern over the past two decades. The highly political crude oil market displays the path of least resistance of the price is higher. US energy policy and geopolitical turmoil have only exacerbated the upward trajectory of the energy commodity since April 2020. Corn’s price path has been higher, making higher highs and higher lows for decades. Gold’s bull market dates back over two decades. Gold may be the best example of the decline in fiat currency values as it is a hybrid between a commodity and a foreign exchange instrument. Many other commodities display the same long-term trends. The recent strength in the US dollar means that commodity prices in other currencies have followed even more bullish price paths over the past year. Buying dips is likely to be the optimal approach The trend is always your best friend in markets. While short-term and medium-term traders follow technicals that depend on the market’s sentiment, long-term trends are a function of macro and microeconomic factors. The decline of fiat currency values continues to push commodity prices higher. Over the past decades, price corrections have been long-term buying opportunities in the commodities asset class. The economic and geopolitical landscapes point to a continuation of the trend. Buying on price weakness has offered optimal results. Even if the US dollar index continues to rise, it will not mean the currency is strong. The foreign exchange market is a mirage that only measures one fiat currency’s value against another. Commodity prices are the actual value indicator, and the long-term trends reveal that currencies are all losing purchasing power. We remain bullish on commodities. However, the higher the prices, the more vicious the corrections will become. Buying when they look the worse could be the best course of action over the coming months and years. -- Trading advice given in this communication, if any, is based on information taken from trades and statistical services and other sources that we believe are reliable. The author does not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects the author’s good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice the author provides will result in profitable trades. There is risk of loss in all futures and options trading. Any investment involves substantial risks, including, but not limited to, pricing volatility , inadequate liquidity, and the potential complete loss of principal. This article does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.
CBOT:AW1!Long
by Andy_Hecht