Coffee Markets Higher
A negative shift in global risk sentiment failed to cause much pressure and the market is trading at the highest level since January 6th this morning. ICE exchange coffee stocks fell by 17,582 bags on Thursday and have fallen below the 1.2 million bag level for the first time since 2000 as they have dropped by more than 839,000 bags since the start of this year. While restaurant and retail shop sales remain below their pre-pandemic levels, supermarket and internet sales have been fairly strong.
The sweeping reversal from an overbought level is a strong technical signal that a top is in place. Given the severity of the negative change in global risk sentiment, cocoa may be vulnerable to long liquidation. December cocoa found early support yesterday and reached a new 6-month high, but closed sharply lower with an outside-day trading session.
December cotton has the appearance of a double top formation and with a jump in open interest to the highest level since March, it appears that fund traders have added to their already large net long position. As a result, selling could increase if support levels are violated. The market seems to have had plenty of bullish news in the past 10 days to see a resumption of the uptrend, so the lowest close since August 21st might be seen as a bearish technical development.
After threatening for several weeks, sugar prices finally broke out of their recent consolidation zone to the downside. With a negative shift in global risk sentiment adding to a bearish global supply outlook, sugar may have a difficult time finding its footing. Energy prices were under significant early pressure that weighed on the sugar market as it should keep Brazilian domestic ethanol demand at subdued levels.
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