Demand Remains Negative Force in Cocoa
There is still no technical sign of a short-term low as the market struggles to absorb the negative demand impact of expanding global virus cases. Cocoa was able to find pre-election strength and climb away from Monday’s 3-month low. A “risk on” mood boosted global equities and the Eurocurrency provided significant carryover support to cocoa prices as they can help to soothe near-term European demand concerns.
Coffee continues to be pressured by the negative shift in European demand prospects from new COVID-19 shutdown and will also be dealing with a near-record Brazilian 2020/21 coffee crop through the first quarter of next year. There were reports that Hurricane Eta will bring significant damage to coffee growing areas in Guatemala, Honduras and Nicaragua which provided support.
It will take a close above 70.87 for December cotton in order to assume a resumption of the bull trend. Continued closes under 70.33, and especially under 69.79 will sour the technical outlook. The market opened up unchanged on the session yesterday but outside market factors turned very bullish. A surge higher in the stock market and crude oil, plus the collapse in the US dollar were seen as bullish short-term forces.
Sugar’s roller coaster ride from late October to early November has resulted in a 129 tick trading range over the past 4 sessions as a very large net spec position has left the market vulnerable to whipsaw price action in front of the election. The fact that sugar declined in the face of stronger key outside markets and positive global risk sentiment could indicate that a bearish global supply outlook could return to a front-and-center standing once post-election sentiment dissipates.
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