Profit Taking Pressure in Cocoa
March cocoa sold off sharply overnight after a gap lower opening and traded back into Friday’s range. This move was telegraphed by disappointing action on Tuesday when the market dropped $60 late in the session after trading to new contract highs. The market had rallied nearly $500 in eight sessions and was vulnerable to a setback, so it was not a shock to see some profit-taking ahead of the holiday.
March coffee was moderately higher overnight, inside Tuesday’s range. The market has fallen 8.50 cents from last Thursday’s two-month high, which has helped corrected an overbought status. Demand is still a concern in light of the new coronavirus shutdowns, but the market is showing signs of being close to a near-term low. It continues to hold its ground above the three major moving averages, which is technically supportive.
With the surge to a new all-time high for the stock market and a drop in the US dollar, the lower close for March cotton on Tuesday was a bearish development. The market seems to have adequate supply, and if a record high stock market is already priced in, then cotton looks vulnerable to at least a short-term correction.
Sugar’s coiling price action over the past week has kept prices in relatively close to last Tuesday’s multi-year high, but it has extended its losing streak to four sessions despite carryover support from the key outside markets like crude oil, equities and the Brazilian real.
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