The market has seen a bounce off of Monday’s lows as a slower than expected start in Brazil, uncertainty on the timing of more India sugar exports and short-covering helped to support the bounce. These positive short-term forces could spark a more significant recovery bounce but the trend looks to remain down. July sugar closed moderately higher on the session yesterday with more active speculative buying helping to support. Talk of the oversold condition of the market, a surge in the US stock market and talk of a slower start to the new crop harvest season in Brazil due to wet weather into the weekend helped to support. Another trade house estimate that Brazil sugar production for the coming season should run near 4.4% above last year helped to limit the advance. Thailand sugar production for the season that began in December is expected to increase 6.2% to 10.3 million tonnes. The USDA attache in India believes production for the 2012/13 season is set to increase to near 29.8 million tonnes due to higher cane production which will leave India as a significant net exporter of near 2.5 million tonnes. Consumption in India is expected to grow to 26.5 million tonnes. Mexico sugar production for the October to April 23rd time frame is at 4.27 million tonnes which is down 10% from last year’s pace.
From the oversold condition, we can not rule out a more significant recovery bounce but the technical action so far today is weak. If a 3-day bounce is all we get, 21.15 becomes next downside target for July sugar.
Technical Analysis
SUGAR (JUL): A bullish signal was given with an upside crossover of the daily stochastics. Daily stochastics are showing positive momentum from oversold levels, which should reinforce a move higher if near term resistance is taken out. A negative signal for trend short-term was given on a close under the 9-bar moving average. With the close over the 1st swing resistance number, the market is in a moderately positive position. The next upside objective is 22.23. The next area of resistance is around 22.00 and 22.23, while 1st support hits today at 21.60 and below there at 21.44.
StockMarketNews Research Team