Blue Line = BRLUSD

The market traded at the low on the first day of the COT period. It then climbed 10.40c with a positive net change of 5.40c. Activity was mostly light as reflected in the report. What stands out is the limited selling by commercials. Is this due to reduced holiday participation or is it something more significant, (in Robusta commercials bought new in an up market). Regardless of the commercial participation, resistance was present. After prices finally broke 124.00, funds continued to buy but selling came from swap dealers, in both markets. In Robusta funds sold. Selling in KC also came from small traders who seem to have taken their profits.

As the week went on, strength continued but the 128.00 level, give or take, became a point of resistance, better illustrated in Nagual’s daily. Selling is present and Friday it became more pronounced. Possibly it was typical Friday liquidation. The 124.00 area seems to have reversed role by becoming now a level of support for now.

The number of EFP/EFS was high which may be clouding the outright activity of commercials. We don’t know but what is certain is that the high number of EFS is not related to Index activity or rebalancing. The usual venue of Index funds rebalancing is the use of TAS.

The market in general remains steady. The loss of consumption due to covid seems to be minimal as internet and supermarket purchases are replacing cafés. With the vaccines now being administered, the activity will slowly readjust towards normal. As to production, we will see what reports are released by other sources, including Judith Ganes. For now strength is provided by funds in KC. Index funds will be rebalancing in the near future.

Spreads continue to be fairly still but steady. In the last few days someone bought fences in JulSep. A couple of thousand lots of the even call were bought while the -2.00 put was sold. A premium as high as .15 was paid for the call over the put with the spread at around -1.35. The trade was likely initiated by either commercial or spec while market makers sold the unreasonably high premium. Whether this is bullish for the market is not clear. Spreads have been bought through the CSO market for strikes above even for the last few expired delivery months with no success. Spreads continue to be an enigma as warehouse stocks continue to climb while forward spreads remain steady.

In general the market is in holiday mode but we may have end of year activity in the next couple of weeks that may provide opportunities one way or another.