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Cocoa Market Analysis

July cocoa was able to recover from an early plunge below the key 2220 level but is having trouble climbing all the way back into positive territory this morning. A negative shift in macro-economic sentiment is clearly weighing on physical commodities this morning, and today’s OECD forecasts for negative Euro zone growth may cause some concerns over cocoa demand from that region throughout the rest of this year. A report that this season’s Ivory Coast cocoa port arrivals were nearly 23,000 tonnes ahead of last season’s pace weakened the market, even through last year’s totals were impacted by that nation’s political crisis. While recent weather over West African production areas has been constructive for the upcoming mid-crop harvest, the small size and poor quality seen in late harvested main crop cocoa indicates that dry conditions earlier this year will have a negative impact on supply total. With the mid-crop harvested already delayed by a month or more, near-term cocoa supplies are likely to tighten during the next few weeks. July cocoa should climb back into positive territory and retest the initial highs around $2,250 later on during the session when macro-economic sentiment starts to recover and global equity markets find their footing.

Technical Analysis

COCOA (JUL): The close below the 40-day moving average is an indication the longer-term trend has turned down. Momentum studies are declining, but have fallen to oversold levels. The close below the 9-day moving average is a negative short-term indicator for trend. The close below the 1st swing support could weigh on the market. The next downside objective is 2194. The next area of resistance is around 2263 and 2294, while 1st support hits today at 2213 and below there at 2194.

 

StockMarketNews Research Team

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