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Cocoa Market Analysis

July cocoa is finding mild support this morning, and has been able to climb further away from yesterday’s low for the move. Short-covering in front of the holiday weekend is clearly having a positive impact on cocoa prices, as July cocoa was down $168 for the week at yesterday’s close. Additional strength from global equity markets and a weaker Dollar could give today’s rebound a further boost but will likely need the Euro zone to remain fairly quiet and today’s US economic data to avoid a negative surprise. A report that Ghana’s official cocoa purchases this season were running more than 8% behind last season’s pace earlier this month is providing some evidence of tighter near-term supplies in West Africa. However, the market may need to see near-term Ivory Coast cocoa port arrivals decline before prices can make a substantial recovery from this week’s downdraft. Reports of insect damage to Nigerian cocoa production this season has also been seen as a positive factor for cocoa prices this week.
July cocoa should remain well supported this morning from positive outside market factors and end-of-week short-covering with an upside target of $2,150. Until Euro zone risk concerns are substantially reduced, however, cocoa prices will have difficulty putting together an extensive recovery rally.

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 market tilt is slightly negative with the close under the pivot. The next downside target is 2074. The market is approaching oversold levels on an RSI reading under 30. The next area of resistance is around 2122 and 2142, while 1st support hits today at 2088 and below there at 2074.

 

StockMarketNews Research Team

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