Not So Sweet After All??
Today’s Spotlight Market
The direction for Sugar prices may take a cue from the energy markets, as the recent sell-off in gasoline prices may cause ethanol usage to decline, especially in Brazil, which is the largest producer of ethanol made from Sugarcane. Sugarcane not used for fuel production may be used for food production instead, which would be a bearish factor for the world raw Sugar futures contract. However the effects of this switch from fuel to food usage would not occur until the 2015-16 production season, with a myriad of still unknown factors potentially influencing where producers ultimately shift their crops for processing. ?
Fundamentals
The recent price rally in Sugar futures prices off of multi-year lows has encountered some headwinds, as prices failed to hold above major chart resistance levels. It appeared that the sharp price rally last Tuesday may have been a signal that prices may have finally reached a near-term low at 15.42, as the market finally moved above the downtrend line drawn from the 2014 highs made back in June. However, the upward momentum was short-lived, as prices declined by over 2% on Thursday, which may be signaling that the recent rally is nothing more than a ?bull trap? in a bear market.
It is notable that Sugar market fundamentals are becoming less bearish, as the huge global Sugar surplus seen the past few years is beginning to diminish. In fact, the International Sugar Organization recently lowered their forecast for the global Sugar surplus to a mere 473,000 tons for the 2014-15 marketing year and expects the 2015-16 season to be in deficit.?
As we move into 2015, traders and analysts will continue to keep an eye on the value of the Brazilian Real, as any further weakness in the currency may encourage producers to attempt to increase exports as a way to obtain more reals when converting foreign currency obtained from sales outside of Brazil.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for March Sugar, we notice prices have turned choppy since the major downtrend that started in late June finally found some buying support near the 15.50 price level in September. Since that time, prices have staged a series of short-term rallies followed by price declines, with a new low being made back earlier this month. An attempt to move prices above the major downtrend line drawn from the June highs lasted only 1 trading session, as fresh selling emerged which suppressed any additional upward momentum as prices moved once again back below the 20-day moving average.
The 14-day RSI continues to hold near neutral levels, with a current reading of 45.01. The potential double-bottom formation on the daily chart should be noted, but a weekly close above the late June downtrend line would need to occur to add credence to this bullish chart formation. Support is seen at the recent low of 15.42, with resistance found at the November 12 high of 16.44.?
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