U.S. Airstrike on Iranian Leader Could Threaten US-China Deal

The U.S. led strike on high level Iranian leader could have far reaching implications, including US-China trade deal, reports Oliver Sloup.

The United States carried out an airstrike last night, taking out Iranian general, Qassem Soleimani. People more familiar with politics in the Middle East have said that this is more noteworthy than the killing of Osama Bin Laden. This has added extra volatility in the overnight and early morning trade. There are concerns that this could throw a wrench into trade negotiations with China, that coupled with a stronger US Dollar has led to pressure in the grain complex. This is a fluid situation, with the time frame pending on what the potential retaliatory actions may be.

Corn (ZCH)

Fundamentals: Export sales this morning came in at Export sales this morning came in at 531,400 metric tons, down 15% from the previous week and down 43% from the four-week average. Argentina’s planting progress is near 85%, weather and crop development will continue to be monitored closely. The next big-ticket item will be the Jan. 10 USDA report, we will be positing estimates in the coming days. We have been bullish, but the events of last night have put us on defense, moving our bias to neutral.

Technicals: Corn futures managed to close above technical resistance, but the conviction was lacking. The bulls need to see consecutive closes above 390 ½ to encourage that next wave of short covering. On the support side of things, 385 is the line in the sand to defend.

Bias: Neutral/Bullish
Previous Session Bias: Bullish
Resistance: 388 ½-390 ½***, 407 ¾-411 ¾****
Pivot: 385
Support: 377-381***, 365-365 ¾****

Soybeans (ZSH)

Fundamentals: March soybean futures are under pressure this morning on concerns that the airstrike on Iranian general Qassem Soleimani may throw a wrench into trade negotiations with China. Export sales this morning came in at 330,300 metric tons, down 55% from last week and 66% below the four-week average. The next big-ticket item will be the USDA report, we will be positing estimates in the coming days. Our bias has been neutral and remains neutral this morning. We would like to look at the short side if we see a rally towards our more significant technical resistance levels.

Technicals: The market moved out above our pivot pocket but failed to hold those gains into the close, the top end of that coming in at $9.55. If the bulls can achieve consecutive closes above here, we could see a continuation of short covering take us towards $9.68 ½-$9.70. This pocket represents the double top high from October, coupled with an RSI (relative strength index) over 70, it may be too big of a barrier for the bulls to chew through on the first test.

Bias: Neutral
Previous Session Bias: Neutral
Resistance: 968 ½-970****
Pivot: 950 ½-955
Support: 933 ¾-937 ¼***, 920-922 ¾****

Chicago Wheat (ZWH)

Fundamentals: Export sales this morning came in at 312,900 metric tons, down 56% from last week and down 46% from the four-week average. The U.S. Dollar Index is finding strength in the overnight and early morning trade, adding a headwind to the overbought market.

Technicals: Chicago wheat futures made new highs for the move yesterday but failed to sustain that price action through the close. We don’t see much value in wheat in the mid-$5 range, but the chart has been constructive. We would like to be on the short side but will try to wait for the double-top highs from June, $5.72 ¼-$5.73 ½. This is significant resistance and if this objective was achieved this week, the RSI would likely be in overbought territory, setting up for a good risk/reward play to the sell side.

Bias: Neutral
Previous Session Bias: Neutral
Resistance: 572 ¼-573 ½***
Pivot: 554 ½-557 ¼
Support: 536 ¼-538 ¾***, 527-529 ¼****

Kansas City Wheat (March)

Techncials: KC Wheat futures soared higher but reversed into the afternoon session, leaving an ugly candle that has led to spillover weakness this morning. Key support comes in from $4.70-$4.71 ¾, this pocket was previously resistance, representing the 50% retracement and other previously important price points. The RSI reached 73 yesterday, more overbought than we peaked in May.

Bias: Neutral
Previous Session Bias: Neutral
Resistance: 488 ½-490 ½***, 498-500**, 509 ¾-513***
Pivot: 475-477 ¼
Support: 470-471 ¾****, 453 ¾-458 ¾***

Cotton (March)

Fundamentals: Ag markets are under pressure this morning as global concerns rise along with the U.S. Dollar Index. Weekly export sales came in at 246,200RB, 82% higher than last week and 19% above the 4-week average.

Technicals: March cotton futures are running out of gas for the time being, but the trend of higher lows and higher highs is still intact. The bulls will want to defend technical support, we see that as 66.93-67.13. Consecutive closes below this pocket would neutralize the trend.

Bias: Bullish/Neutral
Previous Session Bias: Bullish/Neutral
Resistance: 70.50-71.15**, 72.34-72.80****
Pivot: 69.07-69.20
Support: 66.93-67.13***, 62.81-63.73***

Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com. Sign up for a complimentary two-week trial of 1 or all 4 of our daily Blue Line Express commodity reports!