REUTERS QUARTERLY TECHNICAL OUTLOOK

March 2019

Oil and spot gold may extend gains moderately in Q2 before reversing the uptrend. Palm oil is expected to complete a corrective cycle by approaching a key

resistance at 2,398 ringgit again. Grains and cocoa are bullish, while base metals and the peaking spot palladium look very bearish. Special attention is drawn to

dollar index which is poised to soar.

2

Daily chart Brent oil may extend its gains to $72.68 per barrel in the second quarter, as suggested by a Fibonacci ratio analysis and its wave pattern.

The current uptrend started around a support at $49.88, the 61.8 percent retracement of the uptrend from the 2016 low of $27.10 to the 2018 high of $86.74.

Such a retracement ratio may exist between current rally and the downtrend from $86.74 to the Dec. 26, 2018 low of $49.93. Another retracement analysis on this downtrend reveals the 61.8 percent level at $72.68.

The resistance at $68.33, the 50 percent level, has been more or less broken. The break looks reliable, due to the failed first attempt on Feb. 22.

Given that oil has risen high above $63.96, the 38.2 percent retracement of the uptrend from $27.10, it may approach $72.66, which almost coincides with $72.68.

The uptrend from $49.93 mainly consists of three waves. The third wave labeled c is unfolding. It is capable of traveling to $72.71, its 100 percent projection level, as it has extended above its 61.8 percent level at $67.66.

Brent oil may extend gains to $72.68

All the calculations are consistently suggesting a key level around $72.70, which may be the ulti-mate high that oil could hit in the second quarter. After reaching this target, oil will either re-sume its downtrend from $86.74 or start a deep correction towards $63.96.

A break above $72.71 may lead to a gain to $78.05, while a break below $63.96 could signal a completion of the current rally.

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3

Daily chart U.S. oil may rise into $63.71-$64.53 range per barrel in the second quarter, driven by a wave c.

This is the third wave of a three-wave cycle from the Dec. 24, 2018 low of $42.36. The cycle looks like a zigzag. Given that the wave c has traveled above its 61.8 percent projection level at $59.45, it is likely to extend to $64.53. The equality of the first wave to the third wave is also a characteristic of the zigzag.

A retracement analysis on the uptrend from the 2016 low of $26.05 to the 2018 high of $76.90 reveals that the current uptrend was caused by the support at $45.47, the 61.8 percent retracement.

Oil has surged high above $57.48, the 38.2 percent level. It is likely to gain more to $64.90, the 23.6 percent level. In the meantime, a retracement analysis on the downtrend from $76.90 to $42.36 marks a similar target at $63.71, the 61.8 percent level.

Based on all these calculations, the beginning of the second quarter is expected to see oil extending its gain to $63.71-$64.53 range. However, around the end of the quarter, oil may come back to $57.48.

U.S. oil on roller-coaster ride

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That is going to be a roller-coaster ride to both bulls and bears. The biggest winners are probably among option traders. A break above $64.90, which is highly unlikely, could lead to a gain to $69.48. Support is at $57.48, a break below which may signal a reversal of the uptrend.

4

Weekly chart Spot gold may test a resistance at $1,380 per ounce in the second quarter, a break above which could open the way towards $1,483.

The resistance is identified as the 38.2 percent retracement of the downtrend from the 2011 high of $1,920.30 to the December 2015 low of $1,045.85. The metal failed twice to overcome this barrier in July 2016 and April 2018. It is making its third attempt.

Wave pattern suggests the progress of a wave c from the August 2018 low of $1,159.96. A projection analysis reveals a resistance at $1,346, the 76.4 percent level, which caused a pullback towards a falling trendline. The pullback seems to have ended around a support at $1,281.

To retest the resistance at $1,380, gold needs to maintain above $1,281, as a break below which could cause a loss to $1,195.

It will be difficult to confirm a break above $1,380, if the metal could finally make its way towards this level. Slightly above $1,380 is a key resistance at $1,403, the 100 percent projection level.

Spot gold may test resistance at $1,380

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Unless the market sentiment becomes extremely bullish, the metal may struggle in the resistance zone of $1,380-$1,403 before seeking its next direction.

A failure to break $1,380 would signal the completion of a wedge that developed from $1,045.85. The downtrend from $1,920.30 would then resume.

5

Weekly chart

Spot palladium may temporarily peak around a major resistance at $1,668 per ounce, and then start a deep correction in the second quarter.

The resistance is identified as the 161.8 percent projection level of an upward wave C from the January 2016 low of $449.55. This is the third wave of a presumed three-wave cycle from the December 2008 low of $157.

The preceding projection levels worked well as resistances, such as the 50 percent level at $826, the 61.8 percent level at $915 and the

86.4 percent level at $1,100. There is a good reason to believe that the 161.8 percent level at $1,668 could trigger a decent correction.

Indeed, the linear rise from the August 2018 low of $832 looks so steep that it is prone to a sudden collapse. Working together with the resistance at $1,668 is another one at $1,683, the 123.6 percent projection level of an upward wave c from $832.

These two resistances are expected to form a strong resistance zone to trigger a deep

correction which has been absent ever since the start of the wave c.

On the daily chart, the bearish divergence strongly indicates an exhaustion of the wave c. A rising trendline passing through the peaks of the wave 1 and the wave 3 points at a possible peak of the wave 5 around $1,683. A completion of the wave 5 will mark the end of the wave c as well.

A break above $1,683, which is least likely, may trigger a gain into the range of $1,783-$1,946.

Spot palladium to temporarily peak around $1,668

Daily chart

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6

Daily chart LME copper may break a support at $6,191 per tonne and fall towards $5,833 in the second quarter, as suggested by its wave pattern and a retracement analysis.

The metal could have just completed a wave B at the March 21 high of $6,555.50. It is the second wave of a big correction from the June 7, 2018 high of $7,348.

The wave B adopted an irregular flat pattern, which consists of three smaller waves. The third wave labelled c is roughly 1.382 times the length of the first wave labelled a, as revealed by a projection analysis.

Such a relation, along with a small double-top forming around $6,555.50, is good enough to confirm a completion of the wave B.

With the third wave labelled C on the way, the metal could eventually drop to $5,475, the 61.8 percent retracement of the uptrend from the Jan. 15, 2016 low of $4,318 to $7,348.

A realistic target could be $5,833, which will be confirmed when copper breaks the nearest support at $6,191.

LME copper may fall towards $5,833

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The break is highly likely as the double-top points at a target around $6,150. Resistance is at $6,436, a break above which could lead to a gain to $6,583.

7

Weekly chart LME aluminium may break a support at $1,824 per tonne and fall towards $1,736 in the second quarter, as suggested by its wave pattern and a projection analysis.

The support is provided by the 61.8 percent projection level of a downward wave C from $2,267. This wave has briefly travelled below a support at $1,824. Chances are it may extend to $1,551.

A head-and-shoulders developing from the December 2017 high of $2,290.25 indicates a more aggressive target around $1,240. Over the next three months, the realistic target will be $1,736.

The bounce triggered by the support at $1,824 is classified as a pullback towards $1,924, the 61.8 percent retracement. The pullback could have completed.

A rise above the March 20 high of $1,951 could confirm an extension of the pullback towards $1,993.

LME aluminium may fall towards $1,736

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Strategically, the target at $1,736 will become valid when the metal falls below the March 11 low of $1,845.

8

Monthly chart Palm oil may approach a resistance at 2,398 ringgit per tonne again in the second quarter, as suggested by its wave pattern and a projection analysis.

The resistance is identified as the 38.2 percent projection level of a downward wave (c) from the December 2016 high of 3,202 ringgit.

This wave consists of five smaller waves. So far, only three waves have completed. The current fourth wave labeled 4 could be further broken down into three minor waves.

These minor waves are confined within a range of 1,902-2,398 ringgit. The contract is riding on the third wave labeled c, which could travel to 2,398 ringgit.

The resistance at 2,398 ringgit is strengthened by another one at 2,390 ringgit, the 50 percent projection level of a big wave C from 3,967 ringgit. Both the wave (c) and the wave C are far from complete.

Most likely, the current wave c or wave 4 will end around 2,398 ringgit, to be then reversed by

Palm oil may approach 2,398 ringgit again

3-MONTH TECHNICALS

a downward wave 5.

A break above 2,398 ringgit could open the way towards 2,705 ringgit. A break below the support at 2,017 ringgit may cause a loss limited to 1,902 ringgit.

9

Weekly chart The CBOT soybean first month may rise to $9.62-1/2 per bushel in the second quarter, as suggested by a retracement analysis.

The contract has pierced twice above a resistance at $9.04-1/4, the 23.6 percent retracement of the downtrend from the June 10, 2016 high of $12.08-1/2 to the July 16, 2018 low of $8.10-1/2. Its persistence simply means that the uptrend from the $8.10-1/2 has not finished.

An extension of the rally is highly likely, thanks to the formation of a small double-bottom around $8.10-1/2. This pattern happened to develop around a long-term rising trendline.

Making this pattern more reliable is the false break below a support at $8.44-1/4, the November 2015 low. This false break indicates a completion of the downtrend from the 2012 high of $17.94-3/4.

The trend could be broken down into five waves. Such a structure further indicates that the trend could be over.

Either the long-term uptrend from the 2002 low of $4.15-1/2 has resumed, or a very strong bounce is under way.

CBOT soybeans may rise to $9.62-1/2

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The double-bottom suggests a target at $10.09-1/2. Despite the struggle of the price around $9.04-1/4, this target remains intact. It will be aborted, however, should the contract breaks the support at $8.68-1/2.

A break may to cause much damage to the current uptrend, as the loss may be limited to a support at $8.38-1/4, which is strengthened by a similar one established by the rising trendline.

10

Monthly chart CBOT May corn first month is expected to test resistance at $3.98-1/2 per bushel in the second quarter, a break above which could lead to a rise to $4.29-3/4.

The resistance is provided by the 61.8 percent projection level of an upward wave (c) from $3.29-3/4. This wave is capable of travelling into a wide range of $3.98-1/2 to $4.41.

The downtrend from 2012 high of $8.43-3/4 could have been completed at the 2016 low of $3.01, as suggested by its five-wave structure and an inverted head-and-shoulders.

The neckline of the pattern is around $3.98-1/2, a break above this level could confirm both the pattern and a target around $5.87-3/4.

The contract could be riding on a medium-term to long-term bull cycle, which has completed its first phase at the July 2018 low of $3.29-3/4. The second phase is developing, driven by a powerful wave 3.

This wave has a fierce character. It may quickly travel to $4.29-3/4, the 61.8 percent

CBOT corn targets $4.29-3/4

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retracement of uptrend from the 2000 low of $1.74 to $8.43-3/4. Support is at $3.56, a break below which could cause a loss limited to $3.32.

11

Monthly chart CBOT wheat first month may test resistance at $5.01-3/4 per bushel in the second quarter, with a good chance of breaking above this level and rising more towards $5.89-1/2.

The resistance is provided by the 14.6 percent retracement of downtrend from the 2008 high of $13.34-1/2 to the 2016 low of $3.59-1/2.

The downtrend consists of three waves. The third wave labeled C is roughly 0.618 times the length of the first wave labeled A.

Though this mathematical relation is not a perfect signal of a completion of the wave C, it simply makes no sense to assume the extension of this wave towards 38 cents — the 100 percent projection level.

There are higher lows and higher highs on the uptrend from $3.59-1/2. These are classical patterns to indicate the reversal of the preceding downtrend.

The drop from the August 2018 high of $5.93 is categorized as a pullback towards a falling trendline. The fall was driven by a wave (b), the second wave of a presumed three-wave cycle from $3.59-1/2.

CBOT wheat to rise towards $5.89-1/2

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This wave (b) could have completed around a support at $4.27-3/4. It is expected to be reversed by the third wave labeled (c), which is capable of traveling into the range of $5.66-1/2 to $6.55-3/4, formed by its 61.8 percent and the 100 percent projection levels.

A break below $4.27-3/4 could cause a loss limited to $3.59-1/2.

12

Monthly chart New York second month coffee may fall to $0.8065 per lb in the second quarter, probably after a bounce into a resistance range of $1.0255-$1.0710.

The range is formed by the 61.8 percent projection level of a downward wave C from the 2014 high of $2.2910 and the 76.4 percent retracement of the uptrend from the 2001 low of $0.4475 to the 2011 high of $3.0890.

The bounce is classified as a pullback towards the range which had been a strong support before being broken. This pullback could most likely be triggered by the immediate support at the September 2018 low of $0.9510.

After breaking below $1.0710, coffee is biased to fall to $0.8065, which is pointed by a falling trendline as well. The previous retracement of $1.7685 and $1.4565 worked poorly in providing support during the steep fall from $3.0890.

The $1.0710 level stood out as a perfect target and support. Even though it is not very clear how the $0.8065 level performs, it could be roughly regarded as a target.

NY coffee may fall to $0.8065

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A further dip will be likely, as the projection analysis reveals a lower target at $0.7265. These two targets may form a support range to trigger a very decent bounce.

A break above $1.0710 could lead to a gain to $1.2675.

13

Weekly chart New York second month cocoa may retest a resistance at $2,461 per tonne in the second quarter, a break above which could lead to a gain to $2,602.

The resistance is identified as the 38.2 percent projection level of an upward wave (c) from the October 2018 low of $2,008. It is the third wave of a bigger wave C from the April 2017 low of $1,756.

The wave (c) is capable of traveling into a wide range of $2,742-$2,915. It consists of three smaller waves. The correction triggered by the resistance at $2,461 was driven by the second wave labeled b.

This wave b may have ended and the wave (c) has resumed. Strategically, the resumption of the wave (c) will be confirmed when cocoa breaks the immediate resistance at $2,288. A failure could to break the resistance could lead to a retreat to $2,181.

A break below $2,181 may cause a loss to $2,091. However, only a further fall could make the target at $2,461 invalid.

NY cocoa may retest resistance at $2,461

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14

Daily chart The dollar index may rise into a range of 99.21-100.146 in the second quarter, driven by a powerful wave (3) or wave C.

The range is formed by the 61.8 percent projection level of the wave (3) and the 76.4 percent retracement of the downtrend from the Jan. 3, 2017 high of 103.82 to the Feb. 16, 2018 low of 88.253.

The wave (3) has a fierce character. It could easily travel to 99.21. Many smaller waves make up this wave. The first wave labelled i failed to travel above a resistance at 97.873. The third wave labelled iii failed in its first attempt, as well.

However, the index is going to undergo its strongest rally. This time, the resistance at 97.873 may not hold. A break above this level could open the way towards 100.146. A realistic target could be 99.21.

A break below 96.036 may cause a loss to 94.20.

Dollar index to rise into 99.21-100.146 range

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15

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

New York coffee , New York cocoa and Dollar. To retrieve the 24-hr technical outlooks, please press F9 and key in TECH/C.

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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