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Further upside for commodities

12/29/2020

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The rally in global commodities is just getting started. This year, we've noticed strong breakouts in industrial metals and agriculture, which could set the stage for long-term outperformance. On monthly charts, soybeans, corn and wheat futures defended multi-year support levels, and continue to accelerate beyond previous highs. Our work suggests buyers will remain active on dips, with next major resistance around 2013 highs. 
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The Thomson Reuters Core Commodity CRB Index registered a deeply oversold reading this year (below 30 on the monthly RSI, which is rare). As investors rotated into commodities, the oversold bounce confirmed a strong level of support going back nearly 30 years. Investors will continue to scale into commodity positions, seeking higher levels of real returns especially with the tailwind of a lower dollar. This set-up will also support commodity sensitive asset classes such as emerging market equities, which have been out of favor relative to US equities over the past few years.
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