BLUE LINE = BRLUSD
The week was interrupted by the Easter holidays as KC had a 4 day week and RC had a 3 day week. Volume was high in KC but because most of the trading was in spreads the range shrunk to 4.70c. Still, the market was steady enough for a 4.25c gain as it bounced repeatedly off of the 120.00 general area. Any weakness in the market was caused by managed money selling, especially in RC. But what made the market turn positive? There are several reasons.
Besides commercials, who buy weakness and were able to provide a bottom, we see Index and Swap Dealers (end users/institutional) who bought. We also see a fairly good increase in the delta position. Finally, although not evident in the net changes of the positions, there is a clue in the changes of the number of traders where 7 funds covered shorts. Likely, these funds bought after the market turned higher which could indicate that the support that we saw for the days following the COT report was due to fundsí reversal. Whatever the reason, the market was able hold up even though it never actually took off beyond the 128.00 general area. It just held. However, with the roll and option expiration going on at the same time itís difficult to detect a trend or a pattern. This coming Monday, because options have expired, we may get a better feel for the market.
With regards to expiration, there were no dramatic moves in either spreads nor in the outright market. There were no surprises in exercises and abandonments. Even though the roll and option expiration were taking place, there were extraneous factors that are or may be relevant. The Real of course seems to be motivating the coffee market to some extent. If so, itís not because of any evident commercial participation but maybe speculative reasons. Spreads are steady but because of spread trading and not because of forward activity on either side. There is also Starbucks. What better gauge of consumer sentiment exists? There seems to be a correlation between coffee and SBUX but I think that a more sophisticated study than what I presented is warranted. The market for now remains steady. We will have to see what the resistance is like in the 130.00 area, whether the longs will let it continue higher or not.
BLUE LINE = KC
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