BLUE LINE = BRLUSD
After hitting a high of 135.65, (the previous period’s high was 135.60), the market slid 8.75c for a net negative change of 6.70c. This week’s report shows a reversal of up to 11 funds as they liquidated longs to add new sales, index included. In RC, it was similar action with the exception of large traders that added to the pressure.
As we know, funds in KC are mostly algorithms and are blind to any fundamental or currency factors and only respond to momentum. So in order for the market to reverse we would need some other sector to buy a quantity sufficient to reverse the momentum. For now the selling continues but a sharp drop doesn’t seem likely as commercials buy scale down across the board. Strike prices level continue to be areas of interest as calls are converted to synthetic puts, and vice versa depending on market trajectory.
For the days following the report the news was mostly of the Ever Given stuck in the Suez. Bloomberg reported of Vietnamese Robusta deliveries being backed up but container issues have been in the news before this incident. The reaction in KC was minimal. In RC, the arbitrage closed on Friday at 65.04, about the same as Tuesday’s close. Spreads in RC did not react. In KC, spreads ended mostly steady across the board except for the far forward months. Whether such interruptions are bullish or bearish has been debated in the forum since the beginning of the pandemic. For now the market doesn’t seem to be ready to have a sustained upward move.
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