With Friday’s big USDA report now behind us, this week it's all about seasonals vs structure.

Price seasonals are bullish for ag futures in January; futures tend to rally on new year inflation hedging and South American weather concerns.

Structure is getting more bearish: hedge funds are the longest they've been in ag futures since June '18 (see our chart of the week below). Markets like bean oil, chicago wheat, arabica coffee, matif rapeseed, and sugar look overbought. Our models show that momentum CTA traders are also extended long on positive momentum signals across most ag markets.

The macro environment is downgraded to neutral this week. Crude backed off 8-month highs and the US dollar re-strengthened last week...both headwinds for ag futures prices. Last Friday's Nonfarm payroll job numbers were on the weak side at only +145k jobs (vs exp. +160k).

The macroeconomic environment is the biggest x-factor for our markets this week…a neutral input today, but that could change quickly. Investor focus is shifting from Iran to the US-China phase one trade deal signing in Washington on Wednesday. Ag traders will want concrete details around Chinese farm good purchases. Signals around phase two deal momentum would be a positive macro kicker.

January seasonals will be the clearest positive non-fundamental driver for our markets over the near term.

Market structure + CTA positioning becomes a concern if some fundamental / macro / technical trigger causes traders to liquidate big long positions. This is especially relevant for arabica, bean oil, and rapeseed.

Big picture: Although we don't have non-fundamental factor alignment coming into this week (seasonals = bullish, macro = neutral, and market structure = increasingly bearish), the macro environment is a big swing factor and could tip the scales in either direction.

For our full weekly report or for a trial of our research, reach out to us: insight@peaktradingresearch.com.