medical symbol copy and paste
BLUE LINE = BRLUSD
The market began at the lows and remained steady, finally breaking through 190.00 early in the COT period and attempting 200.00 on the last day, closing 15.25c higher from the previous COT close with a range of 16.10c. Robusta on the other hand closed unchanged as the arbitrage traded from 87.19 and ending the COT period at 100.62. The buyers continued to be managed money in KC but small traders and large traders also chipped in. Funds reversed their short position to long by 25%. The sellers were of course commercials who sold against options and probably as origin in the forward months. What stands out as well in the COT report is the relatively sharp increase in delta in both markets. In KC, there is a position change in both calls and puts of the same number, indicating a possible call spread, straddle or strangle, or it may be a coincidence that the numbers are the same.
The market continues to be thin and can move with moderate ease. The COT week was followed by a sharp rejection of the 200.00 price followed by a resumption of strength on Friday that broke through the magical 200.00 price to a high of 205.55 and ending in a steady tone.
The Real was strong but it is still low, allowing origin, possibly, to increase forward selling out to 2024. The strength of the market can be attributed to fundamentals but there is another element that is manifesting itself which is the macro picture. At some point this week the following flash came from Bloomberg:
“Gas, coal, carbon and electricity are all hitting record highs, while the price of oil this week passed $80 a barrel for the first time in three years and natural gas is the costliest in seven. Such gains pushed the Bloomberg Commodity Spot Index to its highest level in a year.”
In RC, it appears that the longs are satisfied with their positions. Spreads there remain strong with the FH ending at $63 but with the arb ending at 105.44 To me, this situation indicates a fundamentally balanced market interrupted by transportation issues. In KC the market, as stated, is driven by both fundamentals and macro. On Friday, spreads became very strong from May forward as origin sold far forwards and traders bought spreads in sympathy with the strong outright futures. ZH and HK remained offered while NU and forward got very strong, at one point approaching zero. At the very end of the day, spreads got sold in the front and in some of the mid months but in the far forwards spreads remained at a premium. It appears that in referencing the sequential spreads, the front spread is naturally lower in value that the next forward spread, i.e. ZH compared to HK, HK compared to KN etc. The reasoning is that if there is indeed tightness then the next month will be tighter than the previous. Add the spec long position and the the relationship of the spreads becomes more profound.
The market continues to be steady. If 200.00 is tested on the downside we will see if it holds and see if it will possibly be the new base of support.
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