Soybeans have been the recipient of substantial buying pressure despite a relatively strong planting season in the US. The November USDA WASDE report showed a revision higher in Soybean yields to 52.5 bu/acres and pegged ending stocks at 480 million bushels. Yet, despite the bountiful harvest, market participants have seen a sizable rally off the October lows, which some attribute to large fund buying. Following the recent presidential election, the US Dollar Index has posted incredible gains relative to the basket of other currencies, which begs the question “Will a strong US Dollar begin to put downside pressure on commodities?”
Technically, the Jan’17 bean contract is at a critical point as the recent rejection seen at the beginning of the week corresponds with a Fibonacci confluence zone from approximately 1051’0 – 1056’0. Curiously enough, today’s action brought prices back down to the previous Fibo confluence zone from 1028’0 – 1030’0, which is where the market initially rejected from on 10/27. While a majority of the moving averages have recently turned up, a breakdown from the previously mentioned Fibonacci confluence zone (1028’0-1030’0) could open the door to further selling pressure in the beans, with initial downside target at 1020’4 and 1009’4 respectively. Given the strength in the USD, and recent technical rejection from the 1051’0-1056’0 area, an argument could be made for a continuation of the recent rejection seen in the soy market. If however, the 1028-1030 area holds support heading into tomorrow’s open, traders could look for a sideways trading environment with 1028’0 and 1056’0 serving as the lower and upper range extremes.
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Series 3 Licensed, CMT
Market Strategist II
Erik attended the University of Illinois in Champaign where he majored in Communication with a concentration in Economics. As a member of the Market Technicians Association, he has distinguished himself as a professional in the field of technical analysis and currently holds the Chartered Market Technician (CMT) designation.
Erik began working as a Technical Analyst at JS Services Research and Trading LLC, where he analyzed futures contracts providing traders with key technical levels and trading strategies. While there, he also created a 4-week Technical Analysis educational course geared toward teaching traders how to utilize Technical Analysis in their trading strategies.