ICE arabica futures gained on Monday in heavy volumes as prices bounced between firm levels of technical resistance and support and continued to feel pressure from speculators’ large bearish positions and expectations of ample global supplies. Raw sugar futures on ICE inched up, but hovered near recent 2-1/2-year lows, and ICE cocoa futures rose during range-bound trading.
Trading on Liffe was closed on Monday for the Easter long weekend. ICE arabica coffee, raw sugar and cocoa trading resumed with a delayed opening following the Good Friday holiday. May arabica coffee futures on ICE Futures US gained 1.25 cents, or 0.9 percent, to close at $1.384 per lb.
The day’s dealings were seen being driven by technical buying and selling. Prices rose early in the session and traded as high as $1.4135 per lb, where they met strong technical resistance near a key Fibonacci retracement level at 61.8 percent below last month’s high. The Fibonacci retracement chart formation indicates that prices could be following past patterns.
“We saw some strength right around the $1.40 level, but we were unable to break through and that’s when we saw some resistance. May coffee has been retracing the losses from the early part of March,” said Boyd Cruel, a softs analyst at Vision Financial Markets in Chicago.
The May arabica contract declined nearly 8 percent during the first 13 sessions of March. Prices recovered slightly from those steep losses on short-covering and profit-taking during the second half of the month. The spot contract ended the month down 3.9 percent. Prompted by the technical selling on Monday, the May contract dropped more than 4 percent to 1.355 per lb before regaining upward momentum.
Prices may be set to retrace last Month’s pattern in technically driven dealings unless they manage to maintain closes this week above technical support near $1.35 per lb, Cruel said. Trading volumes were heavy, at more than 24,000 lots and about 24 percent higher than the 30-day average, even with the delayed opening, according to preliminary Thomson Reuters data.
Prices have felt pressure as speculators have steadily held a large bearish bet in ICE arabica futures and options. Although the non-commercial dealers trimmed the bearish stance in the week to March 26, the position remains near a record level. “The shorts have been comfortably making money better on lower prices. It’s up to the commercials to step in and say they see some bullish fundamentals,” said James Cordier, principal and founder of OptionSellers.com.
Prices felt some fundamental support on Monday from the Brazilian government’s recent decision to defer growers’ loan repayments in efforts to support falling prices. Expectations of hefty Brazilian supplies have been seen pressuring prices. “The commercials will come in when long-term trends are broken. Right now, they see no evidence that the downtrend is done,” Cordier said.
May raw sugar futures inched up 0.03 cent, or 0.2 percent, to close at 17.69 cents a lb. Last week, it touched as low as 17.56 cents, the lowest for spot contract since August 2010. Trading volume totalled about 68,000 contracts, more than 22 percent lower than the 30-day average, preliminary Thomson Reuters data showed. Raw sugar futures have been pressured by forecasts of hefty supplies from top producer Brazil and expectations of a large global surplus.
Prices found some support on Monday on expectations that a large increase in bearish bets by speculators will make the market prone to short-covering rallies, said Michael McDougall, vice president at Newedge in New York. Speculators nearly doubled their bearish position in raw sugar contracts in the week to March 26, which makes the market prone to short-covering rallies such as the one seen last month when non-commercial dealers nearly halved their short position.
May cocoa futures on ICE closed up $14 per tonne, or 0.6 percent, at $2,184 per tonne. Trading remained in a tight range throughout the day after prices tested and failed to surpass technical resistance near the $2,200 per tonne level. ICE cocoa rose as high as $2,198 per tonne on Monday and $2,195 per tonne on Thursday. “The key for this market will be to get back above the $2,200 level and then we’ll see more buying come in,” said Vision Financial’s Cruel.