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Blue Line = BRLUSD
The market made its low on the first day and the high came close to being the high of the week that is covered by the COT. The remainder of the COT week remained volatile, almost visiting the low on this recent Monday, to end the market near the high made on Tuesday, the last day.
Commercials had the opportunity to liquidate some longs, probably option related while funds added shorts. Interestingly, the number of short funds dropped for the first time since their selling campaign began. Possibly meaning, that while existing funds continued to increase their shorts other funds decided to start covering, netting in an increase in new sales. The significance of this may be positive for the market but, as we look at the following day, this recent Thursday, selling again dominated. The buyers on the report were again all the spec groups and swap dealers, who could be either spec or commercial. Managed money longs increased as well while large traders increased their longs vigorously.
In Robusta, the picture is different as commercials aggressively bought. What is similar is that managed money increased shorts while the longs also increased. Large traders sold futures but, based on the difference of the supplemental and disaggregated, it appears that they bought delta while they hedged their futures, at least in part.
Spreads weakened as the market dropped and strengthened as the market ended in a strong note on Friday. This strength may have been due to reports by several weather services of frequent cold fronts developing in the coffee regions of Brazil. One service emphasized that although these cold fronts are more like cool fronts, and non threatening to crops, the possibility of a sudden frost is always present.
The COT report is more bullish than last week’s considering the activity of the funds. In general, however, it appears that the market will remain in a range, possibly 95.00 to 100.00, give or take, in Sep. Any rally will be met by commercial and spec long selling. It appears that the bearish fundamental factors are already in the market and any bullish news should inspire a steady market sentiment.
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