Blue Line = BRLUSD
The low of the period took place on the first day of the report at the same level where solid commercial bids traded and have been resting. The numbers on the COT report are difficult to pinpoint because of the then approaching expiration and the roll. The Dec OI dropped by almost 31k while the total was down by around 3k, meaning that spreads dominated the volume and that many position holders rolled and were content with their position. Yet, two sectors stand out - funds who increased their shorts, and swap dealers who seem to have reversed their shorts into longs. The result of which was a range of 5.40c and a net increase of 3.85c. The remainder of the week consisted of option related activity but the market remained steady. Today of course we saw some solid strength.
Although Hubblerockís call that the market would go higher this week is worth noting, personally I donít agree with the reasoning. Itís not that I donít believe that damage has taken place in Brazil. I look at the market with a different lens. But feel free to join Hubbís party truck.
The Real has been volatile and mostly showing strength. The 5,148 lots that swap dealers bought is impressive but it may be a one time deal. For sure, it was enough to reverse the funds. We also have serious weather in CentAm. What I will be watching is the intensity of the fund buying as well as that of the commercial selling. If there really is an issue with the supply of coffee, the selling will thin out. Letís also remember that itís roll time and the market tends to do the unexpected.
The front spread has been weak while the rest of the spreads have been strong. Itís possible that there was origin selling today because far forward spreads were strong as well. I agree with Hubblerock that Nagualís and othersí charts should be followed. I would look to buy dips but, again, if commercials and other longs compete to sell strength, it may be just another selling opportunity.
March is now the lead month.
« Back to index