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The market seems vulnerable to follow-through technical selling as this is the time of the year when there is less supply news than normal and technical factors have a tendency to move the market. Demand news is important in this period between the main crop and the mid crop in the Ivory Coast and demand is in question with the economic set-up in Europe. If the bearish forces of the debt situation in Europe re-surface as a driving force for financial markets, demand will be in question. After grinding their way up to new highs early yesterday, July cocoa prices fell apart late in the session and finished the day with a sizable loss as they posted both the weekly high and weekly low during the session. With little fresh news from the fundamental side of the market, cocoa found its main support from a strong performance by the British Pound, which reached its highest levels since last week off of the general move away from risk aversion in financial markets. Cocoa arrivals in Brazil were running over 6% behind last year’s levels, although it is still early in their production season. Cocoa bean imports to the US in April were just 43.5 million pounds from 141.8 million in March. If the weather stays favorable for the Ivory Coast, the mid-crop production is likely to exceed last year and this, combined with expectations for expanding production in Indonesia, Brazil and even Vietnam should help counter ideas that longer-term supply will not be able to keep up with longer-term demand. ICE Cocoa warehouse stocks were down 23,346 bags to 4.429 million bags.
TODAY’S GUIDANCE: Supply tightness should become less of an issue for the second half of the year and the market seems to be trading off of demand prospects which have shifted from quite positive in early May to highly questionable today. It will take a significant shift in the demand situation to see much follow-through higher on rallies. Demand concerns could re-surface on any further financial difficulties in Europe.
TODAY’S MARKET IDEAS: Short-term resistance for September cocoa is at $2993 and $3028 with support at the $2943 and $2908. A move under $2908 could spark a resumption of the downtrend and another leg down.
Cocoa Market Commentary – 2010.06.11
by Terry Roggensack on June 11, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
The market seems vulnerable to follow-through technical selling as this is the time of the year when there is less supply news than normal and technical factors have a tendency to move the market. Demand news is important in this period between the main crop and the mid crop in the Ivory Coast and demand is in question with the economic set-up in Europe. If the bearish forces of the debt situation in Europe re-surface as a driving force for financial markets, demand will be in question. After grinding their way up to new highs early yesterday, July cocoa prices fell apart late in the session and finished the day with a sizable loss as they posted both the weekly high and weekly low during the session. With little fresh news from the fundamental side of the market, cocoa found its main support from a strong performance by the British Pound, which reached its highest levels since last week off of the general move away from risk aversion in financial markets. Cocoa arrivals in Brazil were running over 6% behind last year’s levels, although it is still early in their production season. Cocoa bean imports to the US in April were just 43.5 million pounds from 141.8 million in March. If the weather stays favorable for the Ivory Coast, the mid-crop production is likely to exceed last year and this, combined with expectations for expanding production in Indonesia, Brazil and even Vietnam should help counter ideas that longer-term supply will not be able to keep up with longer-term demand. ICE Cocoa warehouse stocks were down 23,346 bags to 4.429 million bags.
TODAY’S GUIDANCE: Supply tightness should become less of an issue for the second half of the year and the market seems to be trading off of demand prospects which have shifted from quite positive in early May to highly questionable today. It will take a significant shift in the demand situation to see much follow-through higher on rallies. Demand concerns could re-surface on any further financial difficulties in Europe.
TODAY’S MARKET IDEAS: Short-term resistance for September cocoa is at $2993 and $3028 with support at the $2943 and $2908. A move under $2908 could spark a resumption of the downtrend and another leg down.
Tags: Cocoa, Softs
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