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With a weak US dollar and positive action from outside market forces, the bounce yesterday is not too impressive and the market may see choppy to higher trade over the short term to correct the oversold condition before a resumption of the downtrend. September cocoa prices ended slightly higher but well off of the day’s peak on Monday after a failed attempt to trade above resistance at $3020. Cocoa continues to consolidate last week’s dismal price action. Excess rain and moisture has made the process of properly drying the beans increasingly difficult in the Ivory Coast and at the same time has lowered the overall quality of the mid-crop, but the outlook for the main crop in October is improving. Some cash traders said they have had to turn away most (up to 80% on some accounts) of the cocoa beans offered due to insufficient quality. Quality issues have restrained supplies and increased the year over year supply deficit. Total Ivory Coast arrivals stand at 1.082 million metric tonnes since the season began last October and are about 1.9% under year ago levels. Ivory Coast production is on pace for its lowest levels since the 2004/05 season, exacerbated by excessive rainfall and years of under investment. However, reports of prolonged periods of sunshine may have helped cocoa pod development. Still, weather forecasts for lower temperatures could slow the start of the main crop in October, which in turn would further damage buds, weigh on quality and reduce production. Indonesia crop conditions appear to be improving with decent weather recently. Technically, September cocoa is trying to trend higher helped by a “higher” high and low on Monday. However, the intermediate trend is down for cocoa and would require, at least, a short term move back above $3020 to flip the sentiment positive. In the event prices are able to turn higher, there is a retracement target above at $3060. In the meantime, we would like to see if the current attempt at higher prices has any legs before getting overly aggressive on the short side of the cocoa market.
TODAY’S GUIDANCE: Resistance for September cocoa comes in at $3020 and $3056. Keep $2806 as the next target.
Cocoa Market Commentary – 2010.07.27
by Terry Roggensack on July 27, 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!
With a weak US dollar and positive action from outside market forces, the bounce yesterday is not too impressive and the market may see choppy to higher trade over the short term to correct the oversold condition before a resumption of the downtrend. September cocoa prices ended slightly higher but well off of the day’s peak on Monday after a failed attempt to trade above resistance at $3020. Cocoa continues to consolidate last week’s dismal price action. Excess rain and moisture has made the process of properly drying the beans increasingly difficult in the Ivory Coast and at the same time has lowered the overall quality of the mid-crop, but the outlook for the main crop in October is improving. Some cash traders said they have had to turn away most (up to 80% on some accounts) of the cocoa beans offered due to insufficient quality. Quality issues have restrained supplies and increased the year over year supply deficit. Total Ivory Coast arrivals stand at 1.082 million metric tonnes since the season began last October and are about 1.9% under year ago levels. Ivory Coast production is on pace for its lowest levels since the 2004/05 season, exacerbated by excessive rainfall and years of under investment. However, reports of prolonged periods of sunshine may have helped cocoa pod development. Still, weather forecasts for lower temperatures could slow the start of the main crop in October, which in turn would further damage buds, weigh on quality and reduce production. Indonesia crop conditions appear to be improving with decent weather recently. Technically, September cocoa is trying to trend higher helped by a “higher” high and low on Monday. However, the intermediate trend is down for cocoa and would require, at least, a short term move back above $3020 to flip the sentiment positive. In the event prices are able to turn higher, there is a retracement target above at $3060. In the meantime, we would like to see if the current attempt at higher prices has any legs before getting overly aggressive on the short side of the cocoa market.
TODAY’S GUIDANCE: Resistance for September cocoa comes in at $3020 and $3056. Keep $2806 as the next target.
Tags: Cocoa, Softs
About Terry Roggensack