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Cocoa Market Analysis

July cocoa remains under considerable pressure this morning, and has extended this current downside breakout down to a new low for the move. Cocoa prices continue to take most of their direction from negative outside market factors, as rising anxiety from Euro zone debt problems has fueled a “risk off” wave throughout commodity and equity markets this morning. This may be a particularly negative factor for the cocoa market, as Germany and the Netherlands are traditionally two of the largest consumers of cocoa beans. There are expectations that emerging market cocoa demand should improve this year but consistent demand levels from Euro zone countries will be needed in order to support the market. A major European trade house forecast this season’s global supply deficit at 25,000 to 50,000 tonnes, well below the International Cocoa Organization’s current global supply deficit estimate of 71,000 tonnes. However, that firm projected global grindings to rise 3% this season, above the ICCO’s forecast for a 2% global grindings rise this season. There has been little change in the recent weather pattern over West African cocoa production areas, with consistent rainfall putting additional pressure on cocoa prices. July cocoa is likely to remain on the defensive during today’s session, and could slide down towards the $2,143 level if the Euro zone debt situation continues to erode macro-economic sentiment.

Technical Analysis

COCOA (JUL):¬†Daily stochastics are trending lower but have declined into oversold territory. The market’s close below the 9-day moving average is an indication the short-term trend remains negative. The close below the 2nd swing support number puts the market on the defensive. The next downside target is now at 2102. The next area of resistance is around 2225 and 2286, while 1st support hits today at 2133 and below there at 2102.

 

StockMarketNews Research Team

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