BLUE LINE = BRLUSD
The chart continued showing a steady tone which prevailed for the COT period with daily dips to the 130.00-131.50 level. Volume shrunk as the market managed a range of 6.40c and a net change of positive 4.10c. The buyers in KC were swap dealers, index and large traders while commercials sold both, against options and as origin, possibly. Managed money sold new and remained long 45,634 lots gross, shared by 90 funds. The remainder of the week showed a very weak market as funds and others sold pushing prices below 130.00, possibly partly due as a reaction to the increase in the Selic. Origin selling ceased as the market weakened during the days following the report and the consumer end seemed to be present in the form forward buying, but not very intensely.
The OI increased in KC although it dropped in the K contract even though we have several days before the roll is even on the radar screen. In RC the front month lost considerably more contracts as almost all non-commercial sectors mostly liquidated.
The spread volume increased in KC. Although the warehouse stocks continue to climb, bags pending grading are shrinking, meaning that we may have reached a plateau. Note also that while Brazil has been deposited, other origins have been steadily withdrawn. For now, the warehouse stocks are a negative factor for spreads, as is the long spec position.
Looking ahead, there are many factors already recognized and developing. Production estimates continue to be bullish and the Brazilian economy is encountering challenges. The US economy is slowly recovering but markets are influenced more by bond prices as inflation fears increase, in spite of Fed assurances. Technically prices seemed to be consolidating until Friday where selling broke through the 130.00 and remained below it. During this time, sell signals were posted by Nagual. Index funds increased their long position during this COT period signifying longer term sentiment. For now, all funds are the focus together with forward support by the consumer sector. May roll is approaching as is autumn in Brazil.
« Back to index