Strong Economic News Supports Cotton
While cocoa prices saw coiling action late last week, they closed on Friday above their 3 major moving averages for the fourth time over the past 8 sessions, and did so in spite of significant weakness in key outside markets. If global risk sentiment continues to improve, cocoa prices may be able to reach 2-month highs this week.
Coffee prices have had an eventful start to the third quarter reaching a six-week low in early July before rising more than 44% the following three weeks, only to finish July with a 16% drop in 4-sessions. After following through to the downside and reaching a 1 1/2 week low to start August, however, the market has held within a 6.50 cent trading range the past four sessions.
While overbought technically, the market managed to close higher every day last week and gained 231 points or 2.6% for the week. Open interest continued to advance which suggests that funds are buying more and more cotton. The market posted a new contract high and pushed up to the highest level since June of 2018 for the nearby contract.
Although it may face headwinds from a negative turnaround in key outside markets, sugar has bullish supply-side developments that can help to keep the market in an uptrend. Increasing concern that last month’s frost event will result in a sizable reduction in Brazil’s sugar production provided support.
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