Morning Futures Roundup
Sugar's Price Rebound May be Stalling
After successfully testing major psychological support at 20.00, July Sugar futures prices have rebounded modestly, but additional gains may be hard fought. First we have the start of the Brazilian cane harvest, with ships lining up at Brazilian ports expected to load 1.2 million metric tons of Sugar. Though Brazil's harvest is expected to be lower this season, huge supplies out of India and Thailand are expected to more than make up any Brazilian shortfall. In addition, continued concerns about the health of the global economy and slower growth prospects out of China are expected to aid in forming a global Sugar surplus this coming season.
Technically, prices have been correcting from oversold levels, with large speculators having already liquidated much of their net-long positions during the past couple of weeks. The non-commercial net long position has fallen to only 61,148 contracts as of May 8th, according to the most recent Commitment of Traders report. This is only º of the net-long position seen during the commodity-wide bull market back in 2008, and is a signal that speculative interest is moving out of Sugar and into other markets. If that is the case, commercial traders may start to play a greater role in the market's direction, especially if hedge selling increases as the South American harvest progresses.
Looking at the daily chart for July Sugar, we notice prices failing to close above the 20-day moving average during the mini rally this past week. This failure may negate the "V" bottom formation that appeared last week. The 14-day RSI has turned lower, with a current reading of 36.56. The May 14th low of 20.07 appears to be support for the July futures, with resistance found at the May 7th high of 21.17.
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