The entire commodities complex has notably rallied as the conflict in the Middle East comes to a boil, TDS commodity strategist Daniel Ghali notes.

Downside asymmetries in positioning risks remain significant

“The entire commodities complex has notably rallied as the conflict in the Middle East comes to a boil, but this price action may actually be underscored by a reversal in demand expectations embedded within commodities prices associated.”

“Under the hood, however, the underlying macro force behind this reversal appears to be associated with global macro flows, in particular the fierce price action in global bond markets and the broad USD weakness associated with a firming JPY.”

“While this has raised the bar for natural outflows from CTA trend followers in the base metals complex, downside asymmetries in positioning risks remain significant across Copper & Zinc markets.”