Commodity markets: An improving profile – RBC CM

Research Team at RBC Capital Markets, suggests that we have witnessed a broad improvement in the commodity backdrop over the past two months.

Key Quotes

“Using the Bloomberg Commodity Index as a reference, note that the Index posted a bullish trend reversal above 82.28 on April 19 – reversing the pronounced downtrend that had been in place since 2014.

The resulting shift in long-term sentiment has been corroborated by prices moving above the Ichimoku cloud as well as the 200-day moving average.

With the formation of an ascending channel pattern reflecting a more bullish profile, we note that yesterday’s break above the channel top at 88.34 has added to bullish momentum.

This sets the stage for an extension of gains toward the October 2015 high at 91.94, with additional resistance located above here at 93.49.

Although the overbought nature of the RSI study does argue for a short-term correction to develop over the next few weeks, the channel in place indicates that pullbacks to support at 85.95 and 83.72 will attract renewed buying interest.

A close below the channel base at 80.81 will be required to place our bullish view in question.”