Commodities Flash Warning Signs of Persistent Inflation Pressure

Commodity markets are flashing warning signals that inflation pressure may not be finished yet. Oil, natural gas, and key agricultural commodities could test consumers' ability to absorb higher prices.

The recent stabilization of U.S. inflation data has given markets a reason to relax, but the bigger question is whether that apparent stability can last. The risk is not simply that oil prices remain elevated, but rather what happens next: whether higher energy costs begin feeding into other commodities and keep input prices elevated for months.

Several major commodities are showing technical signals that suggest their broader trend may be turning higher rather than merely experiencing a short-lived spike. A simple technical framework uses two moving averages: a 70-session and a 200-session. When the 70-session average crosses above the 200-session average, it can signal that the underlying trend is changing.

Cotton has been trending higher since March, with the 70-session moving average developing a clearly positive slope. The 200-session average has also begun to turn higher, though more gradually. A break above 90 could confirm a rounded-bottom formation and strengthen the case that the cycle has shifted decisively higher.

Corn is sending a similar signal, with prices remaining above the 70-session moving average since the beginning of the year. The key confirmation level now is 520, as seen in 2020 when a bullish crossover was followed by a sharp move from around 350 to 800.