Decline in Sugar & Coffee Futures. What Speculators Expect?

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Sugar futures

SB: Sugar Futures (Sugar #11) contracts for March 2017 delivery has been trending lower with price closing yesterday at 21.11. The decline in Sugar futures came about as price broke down below the technical support area of 22.50 – 22.40. Price initial fell to lows of 21.10 before posting a modest retracement to retest the broken support level before reversing lower. The downside target to 20.85 – 20.55 remains within sight, which could signal a near-term rebound in sugar futures.

The current decline in sugar futures was supported by speculators cutting their bullish bets on Sugar, according to the CFTC’s CoT report released last Friday. This came despite news reports that Brazil’s sugar cane belt was slowing output and the declines were accelerated by a stronger US dollar as well.

SB (Sugar Futures, March 2017 Expiry): Downside prevails, targeting 20.85 – 20.55
SB (Sugar Futures, March 2017 Expiry): Downside prevails, targeting 20.85 – 20.55

In the near term, watch for Sugar futures to consolidate near the downside target of 20.85 – 20.55 with the near-term resistance at 21.56 likely to hold any short-term rally in prices.

KC: Coffee Futures (Arabica) for December delivery are poised to continue to push lower this week after prices gave up the gains in the rally last week that sent Arabica coffee futures to highs above 175. Price has been steadily falling since then, posting lower highs as a result and settling near 160.90 -160.00 support level yesterday. A breakdown below this support could see coffee futures push lower to test the next support identified at 151.00 – 149.85 area.

Speculators, however, remain bullish on Arabica coffee futures pushing the net long positions by 2,631 contracts.

KC (Coffee Arabica Futures, December 2016 Expiry): Price likely to stay range bound within 160.90 – 167.90
KC (Coffee Arabica Futures, December 2016 Expiry): Price likely to stay range bound within 160.90 – 167.90

In the near term, Coffee (Arabica) futures are likely to remain trading within the support zone of 160.90 – 160.13 and the resistance level of 168.50 – 167.90.

CL: Crude oil futures for December delivery are on a steady rally since the start of this week. Price briefly fell to lows below 42.75 before speculation on the OPEC meeting later this month sparked a strong rally pushing oil futures to a two-week high near $45.97.

Oil prices are likely to continue pushing higher with the upside target seen at $49.20. However, in the near term, watch for oil futures to close down below $45.50 which could see price retest the $44.00 price handle.

CL (Crude Oil Futures, December 2016 Expiry): Price likely to target $49.20
CL (Crude Oil Futures, December 2016 Expiry): Price likely to target $49.20

GC: Gold futures for December 2016 expiry has been trading flat for the most part this week after sliding to the lows near $1211 earlier this week. Price action is seen currently moving within the support zone of 1230 – 1225.25 region and a breakout above this level is required for gold futures to post a modest correction towards 1256 followed by 1270 levels, both of which are yet to be challenged for resistance level.

GC (Gold Futures, December 2016 Expiry): Price could retrace to 1256 and 1270, above 1230 support
GC (Gold Futures, December 2016 Expiry): Price could retrace to 1256 and 1270, above 1230 support

The current bearish sentiment in gold comes as the prospects for a US rate hike continue to firm and the US dollar is supported by strong fundamentals into the start of Q4.

Concerning the technical levels, gold prices could offer a short-term bullish bias above 1230, targeting 1256 followed by 1270. The medium-term outlook remains bearish as gold futures contracts are likely to retest the psychological support at $1200.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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