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Hook Reversal Positive Tech Development


Since the start of April, cocoa has been unable to sustain recovery moves as near-term demand concerns continue to be a major source of pressure. For the week, September cocoa finished with a gain of 4 points (up 0.2%) which broke a 2-week losing streak and was a positive weekly key reversal. This is a bullish technical development.


Coffee prices started July with a wide-sweeping outside-day down session and a 4-session losing streak, but the market continues to hold its ground within a wide consolidation zone since early March. With bullish supply developments providing underlying support, coffee may be able to see upside follow-through this week. For the week, September coffee saw a loss of 4.20 cents (down 1.9%) which was a fourth negative weekly result over the past 5 weeks. Ongoing concern with out-of-home consumption due to high inflation weighed on coffee prices late last week.


December cotton looks vulnerable for a rally into the USDA report. The five day forecast has turned very dry for West Texas, and the 6-10 day forecast models and the 8-14 day forecast models both show above normal temperatures and below normal precipitation for West Texas. This would suggest deterioration in the cotton crop over the next two weeks. For the USDA report on Tuesday, traders see US production near 16.03 million bales, 15.25-17.31 range, as compared with 16.50 million bales in the June estimate.


Sugar’s sizable 3-day rally was fueled in part by renewed strength in key outside markets. However, there have been supply-side developments that can help the sugar market maintain upside momentum. For the week, October sugar finished with a gain of 95 ticks (up 5.3%) which broke a 6-week losing streak and was a positive weekly reversal from Tuesday’s 4-month low. The Brazilian currency regained more than 1% in value which also gave a boost to sugar prices as it eases pressure on Brazil’s mills to produce sugar for export.

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