The commodity bull market kicked off in the second quarter of last year, as the global pandemic weighed on markets across all asset classes. Central bank liquidity, low interest rates and government stimulus stabilized the economy and led to a gradual rise in inflation over the past year.
The US Dollar is the world’s reserve currency for the global economy. As a large percentage of commodities, such as gold and oil, are priced in the reserve currency, other countries have to hold this currency to pay for these goods. The same stands for agricultural commodities such as coffee, cotton, cocoa and sugar. All of these commodities use the Dollar as a benchmark price. Sugar, which has become a staple food as the increasing world population requires more and more of it, is not only used as a sweetener for food and drinks – it has also become the main ingredient in biofuels. The opening of the economy is increasingly supporting prices, as supply chains are increasingly opening up.
Having surpassed the February 2020 peak (15.87) there doesn’t seem to be any significant obstacle for the bulls to move the price higher. After 1 year, the asset formed a new high at 18.89 in February 2021 and since then, the price has corrected and formed a corrective wave to reach 14.65. In April 2021 the price returned to the bullish path past 14.65, reached a new 4 year high and is still heading north. A follow-up rally will target the 2017 peak at 21.46. On the downside, the resistance at 14.65 which is now the support will hold the price correction. All technical indicators are in positive rhythm and for the month of August, the asset has moved up by 9%.
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Ady Phangestu
Market Analyst
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