Lower Cotton Close May Spark Correction
Since entering the current consolidation zone in mid-December, the cocoa market has put together several sizable recovery moves only to see near-term demand concerns send prices back to the downside.
In the space of 5 sessions, coffee has gone from threatening a downside breakout to within striking distance of a new 13-month high. With the market already benefiting from a bullish 2021/22 supply outlook, coffee prices should find additional strength from continued improvement with its demand prospects.
March cotton closed sharply higher again yesterday and seems to be following lumber, sugar and other key commodities. The market gapped higher on the open and closed on its highs. This took the nearby contract to its highest level since June 2018.
The market remains in a steep uptrend and May sugar has gained 12.25% in just five trading sessions. This leaves the market in a short-term overbought condition but with increased food security measures by China, and an inflationary tone to many commodity markets, buyers remain active.
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