December 8, 2022

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The bullish and bearish from the recent lumber futures price action

2 min read

Down 41% from the high, but up 189% over the last year.

The price of lumber futures reached a high of $1738.40 back on May 10. That represented at gain of about $1392 from year ago levels.  That is huge to say the least.  

Since, then, the price has moved down about -$720 from the high or -41.39%.  Nevertheless it is still up 189% from the year ago level.  

There is some bullish and bearish for all traders.

Down 41% from the high, but up 189% over the last year.

Technically, there is a little bullish and bearish from the daily chart above.   Looking at the MAs, the price decline from the high initially fell to the 38.2% near $1200 and bounced.  After retesting that retracement level, the $1200 price was broken on June 8th and scooted to a low today of $943.70 today.  In the process, the pair fell below the 100 day MA at $1093.20 and the 50% retracement at $1036.30. 

The current price has seen a bounce today after reaching a new low and is closing higher on the day. However, the price near $1015 area remains below the 50% midpoint AND the 100 day MA at $1093.20.  

Going forward, the 100 day MA will be a key technical level to stay below, if the sellers are to hold onto some control. Move above, and the tilt moves back into the buyers/bulls favor.  

On the downside, the rising 200 day MA is lower at $861.   Ultimately if the lumber and building inflation fear from the pandemic run up is to dissipate, getting below the 200 day MA would be the next key step in the bearish direction.  Moving below would increase the bearish bias in control.

Even so, assuming the fall in price is reflected in the price in the market, the heat is a bit off on the price of lumber for now.  We also could expect to see lower inflation numbers from that sector going forward.  

Can it remain that way? Can the supply and demand get back in balance?  What about other commodities?  Charts and price action like this, the FOMC may be going through right now as they debate transitory or not transitory inflation.  The fall down is what the Fed officials want to  start to see and is also a contributor to the US yields falling from the 1.774% high.  

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