Volatile Trade in Coffee Yesterday
Cocoa prices were unable to see extensive upside follow-through from a positive weekly reversal last week as they continue to be weighed down by near-term demand concerns. While the longer-term demand outlook is more positive, cocoa may have trouble regaining upside momentum.
Coffee’s coiling price action since mid-January may have set the stage for a breakout move, but the market’s rejection of Thursday’s selloff may provide further evidence that the mid-January lows may hold for a while. The Brazilian currency lost more than 1% in value which put some brakes on its recovery move this week, and that became a source of carryover pressure on coffee prices as a weaker currency could lead to more aggressive marketing of Brazil’s near-term coffee supply to foreign customers.
March cotton broke out of the recent consolidation and traded to new contract highs. The nearby contract traded to its highest level since August 2018. This move happened despite a rally in the dollar to its highest level since December 1.
Sugar prices have regained upside momentum and are on-track for their first positive weekly result in 3 weeks. If global risk sentiment remains strong, sugar can head towards a retest of its mid-January highs.
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