Blue Line = BRLUSD
The market began at the highs and ended at the lows in a 7.70c range and a net change of -5.20c. There was some recovery of prices on Thursday following the COT period but the market met resistance likely from commercial delta selling and continued fund selling. In Robusta, commercials bought weakness as well.
As we see on the report, commercials bought new and liquidated shorts. Some forward bids were hit, possibly consumer related, while front buying was mostly options related. Large traders, together with small traders, to a lesser degree, were also buyers. These two groups are to be watched because they are key to any price recovery and could propel prices enough to cause funds to reverse. Itís likely that Thursdayís strength came from large and/or small traders.
On the sell side, we have Index and institutional liquidating longs while other managed money added shorts. Note that some longs were added by managed money as well. The net long position was reduced in KC for managed money and the net short position was increased in RC.
Spreads were generally weaker as the Dec OI dropped while the total OI remained the same, indicating a roll of Dec to forwards. In Robusta, spreads were liquidated mostly trade to trade as option expiration took place and while FND is approaching.
The forum has been very busy which is a good thing. There have been arguments by both bulls and bears. I asked around friends who have trade contacts and there hasnít been any awareness of damaged coffee plants due to dryness and heat in Brazil. There is more concern about the wetness in Viet Nam. At the same time, bears are claiming that the corona pandemic has and will create a void in consumption. But, according to the NCA article posted on the forum, store consumption has dropped while home consumption has increased in the US to a point of equilibrium. I would think that the same is true throughout the rest of the world. The delivery chain doesnít seem to be interrupted either.
The market behavior is echoing these realities. Commercials are buying weakness and selling strength as they always do. Funds are mostly selling in both markets and will continue to do so unless they are disrupted by other specs. Certified stocks have mostly increased this month due to Brazil adding. They may ease off again as GCA stocks continue to do but we see this as irrelevant to outright price action, especially with an abundance of stocks on hand. Personally, I continue to be long strangles and to closely watch Nagualís charts. What we have ahead of us is notice season with roughly 90k lots open in Dec and a sizable Dec option expiration on Nov 12 of both outright and spreads.
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