Crude oil may rally in Q4, driven by a powerful c wave while Spot gold is seen rangebound before rising. Copper may keep on bouncing while aluminium may fall.

Grains and softs look very bullish, as they may well have reversed their long-term downtrend. Palm oil was back on its long-term downtrend.

REUTERS QUARTERLY TECHNICAL OUTLOOK

OCTOBER 2019

2

Daily chart Brent oil may retest a resistance zone of $71.74-$72.66 per barrel in the fourth quarter, a break above which could open the way towards $81.55.

The surge to $71.95 on Sept. 16 has almost re-versed the preceding downtrend from the April 25 high of $75.60. This dramatic rally, although driven by news and typically classified as market noise, helped in altering the bearish course.

Due to this strong rally, waves were relabelled. Oil seems to be riding on a wave (c) from $55.88. This wave may end around either $71.74 or $81.55, its 61.8% and $100% projection levels respectively. Indeed, oil fell deeply after briefly piercing above $71.74. However, compared with the wave (a), the wave (c) looks too short to be complete, in terms of length or duration.

The current speculation is the wave (c) may con-sist of three smaller waves. The second wave labelled b may be ending around a support at $63.96, the 38.2% retracement of the uptrend from $27.10 to $86.74. This wave b will be total-ly reversed by an upward wave c.

This set of retracements well define the medium-term ranges for both the wave (a) and the wave (b). The wave (c) also observes closely the 23.6% level of $72.66 and the 38.2% level of $63.96.

There is a good reason to believe that oil may be

Brent oil may retest $71.74-$72.66 resistance zone

3-MONTH TECHNICALS

confined within the range of $63.96-$72.66 over the next few weeks, until it accumulates enough momentum to clear the zone of $71.74-$72.66.

These waves, when put under a much longer period, are classified as parts of a much big wave C, which is the third wave of a long-term uptrend from $27.10. A projection analysis on this wave re-veals a resistance at $72.71 and a target at $86.79, respectively the 38.2% and the 61.8% levels.

The current bullish outlook is fragilely based on a pivotal support at $63.96, a break below which could make the target range of $71.74-$72.66 temporarily invalid. A bearish target at $56.92 will be established accordingly.

3

Monthly chart U.S. oil may rise to $72.36 per barrel in the fourth quarter, as suggested by its wave pattern and a Fibonacci ratio analysis.

The contract could be riding on a wave C from $42.36, which is the third wave of a three-wave cycle from the February 2016 low of $26.05.

This cycle has been well controlled by a set of retracements on the preceding downtrend from the July 2008 high of $147.27 to $26.05.

The wave A ended around the 38.2% level of $72.36 while the wave B completed around the 14.6% level at $43.75. The 23.6% level works as a strong support, around which, oil has been consolidating for a few months.

Compared to the wave A, the current wave C looks too short to complete. Three smaller waves may make up the wave C.

The third wave labelled c could have started from the August low of $50.52.

This wave may travel into the range of $73.70-$93.07, formed by the 61.8% and the 100% projection levels of the wave C.

Even if this presumed wave C turns out to be an extended wave B, oil is still likely to gain more

U.S. oil may rise to $72.36

3-MONTH TECHNICALS

into the range of $72.36-$73.70, as the wave B may adopt a flat wave mode.

The bullish view will have to reviewed, if oil fails to hold above the key support zone of $49.76-$54.66, as a break below $49.76 will simply mean a resumption of the downtrend towards $26.05-$34.54 range.

4

Monthly chart Palm oil may retest a support at 1,933 ringgit per tonne in the fourth quarter, a break below which could cause a fall towards the next support at 1,634 ringgit.

These supports are identified as the 61.8% and the 76.4% projection levels respectively, of a downward wave C from the December 2016 high of 3,202 ringgit. This wave extends a downtrend from the February 2011 high of 3,967 ringgit.

Five smaller waves make up the wave C. The fourth wave labelled 4 looks sideways. It alternates in wave mode with the second wave labelled 2 which is sharp.

The surge from the July 2019 low of 1,916 ringgit proves to be the final part of the wave 4. The fifth wave labelled 5 may have just started, unfolding towards 1,634 ringgit, as pointed by a falling trendline.

Based on a head-and-shoulders developing between March 2016 and March 2018, palm oil may drop to 1,634 ringgit as well. Another projection analysis on the downtrend from 2,896 ringgit reveals a similar target at 1,639

Palm oil may retest support at 1,933 ringgit

3-MONTH TECHNICALS

ringgit, the 161.8% level.

A break above 2,302 ringgit, however, could confirm a double-bottom forming around 1,933 ringgit, and a bullish target at 2,902 ringgit will be established accordingly.

5

Weekly chart Spot gold may consolidate in a range of $1,489-$1,566 per ounce next quarter, as suggested by its wave pattern and a projection analysis.

The range is formed by the 100% and the 123.6% projection levels of an upward wave c from $1,159.96. This wave could be divided into five smaller waves.

The preceding wave 2 from the Feb. 20 high of $1,346.73 to the May 2 low of $1,265.85 lasted 50 trading days. The current wave 4 has only developed for 14 trading days. These two waves do not match at all. Such a relation suggests a further development of the wave 4.

The wave 2 looks kind of sharp in nature. As a result, the wave 4 could be sideways, confined within the range of $1,489-$1,566.

The expected consolidation may continue into the middle of October if the wave 4 takes about 50 trading days to complete. It is not very clear if the wave 4 takes the shape of a flat or zigzag mode. The only clear part is there might be three smaller waves to make up the wave 4.

A flat would mean the second wave labelled b could travel to about $1,566, while a zigzag

Spot gold may consolidate in $1,489-$1,566 range

3-MONTH TECHNICALS

would suggest the wave b ends far below this level.

A break below $1,489 could cause a fall limited to $1,444. A break above $1,566 may not necessarily open the way towards the range of $1,614-$1,692, as gold will face a stronger resistance at $1,586, the 61.8% retracement of the downtrend from $1,920.30 to $1,045.85.

Only a break above $1,586 could confirm the extension of the uptrend towards $1,692.

6

Weekly chart LME copper may break a resistance at $6,007 per tonne and rise towards the next resistance at $6,191 in the next quarter, as suggested by its wave pattern and a Fibonacci ratio analysis.

A wave C from the April high of $6,632.92 seems to have ended around $5,475, the 61.8% retracement on the uptrend from the January 2016 low of $4,318 to the June 2018 high of $7,348.

Even though this wave looks much shorter than the preceding wave A, a projection analysis reveals that it is roughly 0.618 times the length of the wave A, the completion of the wave C looks convincing if the uptrend from $4,318 is considered intact.

To put it another way, the fall from $7,348 could simply be a correction against the uptrend which may have resumed from the Sept.3 low of $5,518.

Given that the former support at $5,833 triggered a wave B, which lasted about eight months, there is good reason to believe that copper could stay above $5,475 for a few months, which is a much stronger support.

LME copper may rise towards $6,191

3-MONTH TECHNICALS

Theoretically, the metal could rise to $6,632.92, the peak of the wave B. For a quarterly outlook, this target looks too far away. A realistic target will be $6,191.

Strategically, this target of $6,191 will be valid when copper breaks the immediate resistance zone of $5,821-$5,833. A further slide from the current level may be limited to $5,635.

7

Weekly chart LME aluminium may test a support at $1,719 per tonne next quarter, a break below which could cause a fall into the range of $1,550-$1,647.

The support is provided by the 76.4% projection level of a downward wave C from $2,267. Given that this wave has extended below its 61.8% level at $1,824, it could then travel into a wide range of $1,550-$1,719.

From the January low of $1,785.50, a wedge has been developing, the lower trendline of which suggests the target at $1,719.

However, it is hard tell if this wedge is a bearish continuation pattern or a bottom pattern. A break below $1,719 could confirm the continuation of the downtrend towards $1,550, as indicated by the wedge.

A break above $1,824 would signal the completion of the wave c and the reversal of the downtrend. A bullish target range of $1,908-$1,993 will be established then.

The wave C consists of three smaller waves. A projection analysis on the third wave - the wave

LME aluminium may test $1,719

3-MONTH TECHNICALS

c, marks a target zone of $1,470-$1,654, formed by the 100% and the 61.8% levels. A head-and-shoulders even points a lower target around $1,300. It seems the wedge may turn out to be a bearish continuation pattern.

8

Monthly chart The CBOT soybean first-month contract is poised to break a resistance at $9.17-1/2 per bushel and rise towards $10.21-1/2 in the next quarter.

The resistance is identified as the 161.8% projection level of a downtrend from $16.30, based on the fall from the September 2012 high of $17.94-3/4 to the April 2013 low of $13.54-1/2.

Following its two failures to break the resistance in February and June, the contract approached this barrier again. The shallow correction from the June high of $9.21-1/2 may have prepared the contract with enough bullish momentum to clear the resistance.

The long-shadowed hammer forming in May is followed by a small white candlestick. Such a pattern strongly suggests a reversal of the downtrend from $17.94-3/4.

The trend could be broken down into five waves. This five-wave structure further indicates a trend reversal. The bullish divergence on MACD also supplements the bullish signals.

Even if the downtrend has not reversed, the

CBOT soybeans poised to rise towards $10.21-1/2

3-MONTH TECHNICALS

current bounce may at least consist of three waves. The third wave labelled c is capable of travelling to $9.78-1/4, its 100% projection level.

Support is at $8.53-1/2, a break below which could cause a fall into the range of $7.49-1/2 to $8.09-1/4.

9

Monthly chart CBOT first-month corn may break resistance at $3.98-3/4 per bushel and rise towards a range of $4.29-3/4 to $4.59 next quarter.

The resistance is identified as the 14.6% projection level of an upward wave C from the August 2016 low of $3.01. This is the third wave of a three-wave cycle from the July 2000 low of $1.74.

This wave has a minimum target at $5.56-3/4. Its first part completed around resistance at $4.59.

The second part, driven by a wave b, could have ended in the support zone of $3.32-$3.48, formed by the 76.4% retracement of the uptrend from $1.74 to $8.43-3/4 and the 7% projection level of the wave c.

Strengthening this zone is support established by a rising trendline.

The chance that corn will break below the support zone is extremely slim. The bounce from the Sept. 9 low of $3.40 could be a convincing signal that the wave C has resumed.

It seems that the wave C has been mainly controlled by its projection levels. A break above

CBOT corn targets $4.29-3/4 to $4.59 range

3-MONTH TECHNICALS

$3.98-3/4 could indeed open the way towards $4.59.

However, resistance at $4.29-3/4 should not be ignored. Only when this resistance is broken could the target at $4.59 become valid.

A break below $3.48 may cause a fall limited to $3.32.

10

Monthly chart The CBOT first-month contract wheat may retest a resistance at $5.60-1/2 per bushel in the next quarter, as suggested by its wave pattern and a Fibonacci ratio analysis.

The resistance is provided by the 61.8% projection level of an upward wave C from $4.16-1/4. It appears that wheat closely observed this resistance and the support at $4.50-1/4, the 14.6% level.

This wave looks incomplete. It is too short, compared with the preceding wave A that started at the August 2016 low of $3.59-1/2 and ended at the August 2018 high of $5.93.

Three smaller waves may make up the wave C. So far, only two have unfolded. The third wave labelled c is expected to travel into a range of $5.60-1/2 to $6.49-3/4.

Besides the various projection levels, the uptrend from $3.59-1/2 has been roughly controlled by a set of retracements on the fall from February 2008 high of $13.34-1/2.

The 7% level at $4.27-3/4 works as a support, while the 14.6% level at $5.01-3/4 and the 23.6% level of $5.89-1/2 serve as resistances.

CBOT wheat could retest resistance at $5.60-1/2

3-MONTH TECHNICALS

Working closely with the resistance at $5.01-3/4 is another one at $5.05-1/2. These resistances may hold under the first attack by bulls. However, they are likely to be cleared when tested again.

A break below $4.50-1/4 may cause a fall limited to $4.27-3/4.

11

Monthly chart New York second-month coffee may break a resistance at $1.0930 and rise towards $1.2270 per lb next quarter, as suggested by its wave pattern and a Fibonacci ratio analysis.

The resistance is identified as the 23.6% retracement on the fall from $1.7955 to $0.8760. Coffee failed to overcome this barrier in its first attempt. However, it may retest this resistance, as the bounce from the May low of $0.8760 has not completed.

The bounce consists of three waves. So far, only two have unfolded. The third wave labelled c is developing. These waves make up a big wave 4, the fourth wave of a bigger wave C from the November 2016 high of $1.7955. The wave 4 is in the same degree with the preceding wave 2.

Given that the wave 2 reversed about 61.8% of the wave 1, the current 4 may reverse at least 38.2% of the wave 3, to travel to $1.2270. A more bullish target would be either $1.3355 or $1.4445.

The presumed five-wave cycle from the October 2014 high of $2.2910 may turn out to consist only three waves, as suggested by an alternate wave count.

NY coffee may rise to $1.2270

3-MONTH TECHNICALS

Under the three-wave scenario, the downtrend could have indeed completed at $0.8760. Regardless of the wave count, coffee may rise into the fourth quarter.

Support is at $0.9110, the 76.4% projection level of the wave C from $2.2910. A break could open the way towards $0.6380.

12

Monthly chart New York second month cocoa may break a resistance at $2,602 per tonne and rise into a range of $2,742-$2,928 next quarter.

The resistance is identified as the 50% projection level of an upward wave c from $2,008. Cocoa failed to break this resistance in its first attempt in July. With the accumulated strong bullish momentum, it is likely to succeed this time.

This wave is capable of travelling into the range of $2,742-$3,195. It is a part of a bigger C from the April 2017 low of $1,756. The wave C could extend into a higher range of $2,928-$3,652, formed by its 38.2% and 61.8% projection levels.

The rally from $1,756 is presumed to be an extension of the preceding uptrend from the December 2000 low of $707, as the long-term correction from the 2011 high of $3,775 ended around $1,879, the 61.8% retracement of the uptrend.

Even if this presumption turns out to be too bullish, a falling trendline still points a target around $2,928. A fall from the current level may be limited to the support zone of $2,204-$2,288.

NY cocoa targets $2,742-$2,928 range

3-MONTH TECHNICALS

13

Daily chart The dollar index may rise into a range of 100.499-102.56 in the next quarter, as suggested by its wave pattern and a projection analysis.

The range is formed by the 76.4% and the 100% projection levels of an upward wave C from 93.829. This wave could be alternatively counted as a wave (3). Both of them are capable of travelling to 102.56.

A retracement analysis on the downtrend from 103.82 to 88.253 reveals a break above a key resistance at 97.873, the 61.8% level. The break indicates a reversal of the downtrend. The high of 103.82 may be revisited.

Following its failure to break the immediate resistance at 99.225, the 61.8% projection level, the index briefly pierced above this barrier again. This time, it may succeed.

A correction from the current level may be limited to the support range of 97.873-98.194.

Dollar index may rise into 100.499-102.56 range

3-MONTH TECHNICALS

14

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Intraday technical outlooks are available to Eikon users on the following 12 products: Brent oil, U.S. oil, palm oil, spot gold, LME copper, LME aluminium, CBOT soybeans, CBOT corn, CBOT wheat, New York

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Reporting by Wang Tao (Market Analyst, Commodities Technicals), wang.tao@thomsonreuters.com Phone: +65 68703836 Compiled by Jesse Vinay A in Bangalore, commodity.briefs@thomsonreuters.com

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