BLUE LINE = BRLUSD
What we see on the COT report is a result of option expiration and the roll. On the chart, we see wide ranges defined by very light volume relative to total volume as spreads dominated. The last day of the period was the biggest volume day for outright trading with 34% of the total volume and a range of 6.45c. For the COT week, prices ranged 9.25c and registered a net change of -3.10c. The COT report doesn’t show any significant changes in the individual sectors as the market was mostly two ways on most days. Any changes that we see could be the result of expiration, including the Index long liquidation.
The Z OI is high compared to what U was. During the days after the COT, the Z OI has increased to 135,179 lots. Although the high OI is as a result of the roll from U to Z it still translates to an outright position. For the time being the COT report is irrelevant, with or without option expiration. Specs, including funds, seem to be two way as the market seems to be consolidating once again in the 180.00 general area. Rallies seem to be short lived. There is no evidence of consumer buying at these levels. Origin seems to be present, but not in an intense way, as the Real continues to weaken.
Spreads have a large interest in the market. Funds hold a 37,265 lot position in spreads. Many traders from all sectors expect spreads to move higher as tightness is anticipated. One trade source stated, “anticipating tightness in nearby shipments from Brasil would be looking to buy spreads as the board may become the most reliable source for replacement coffees.” Maybe so, but so far the performance of UZ has been contrary to this statement. We will see what ZH will do as it is presently worth -2.75 while UZ is around -3.20. UZ is of course thin and low in OI. Still it is no reflection of shipping problems or tightness. Certified stocks are down for the month but bags pending grading are on the rise once again.
The market continues to be in a steady mode for now but both in outright and spreads speculative positions remain a neutralizing factor.
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