BLUE LINE = BRLUSD
On the first day of the COT week, the market hit the low of 221.70 that triggered the rally to 235.25, on the last day. The one interruption to the strength was on the close last Friday but on Tuesday prices resumed to rally. The days following the COT report the market made a high of 236.25 and dropped sharply near the lows of the COT week. The reason for the initial strength, imo, was mostly due to N liquidation in the form of EFP/EFS, block postings, rolling and outright short covering. The N OI which began with 13,328 lots ended at last posting at 476 lots while the NU spread that began at +.05 ended on this Friday at +3.55. With 3 days into notice period there have not been any notices issued. But as the N OI dwindled so did the market, touching sell stops and creating a collapse of prices. Robusta spreads did not exhibit the same behavior as options expired. The Arabica COT report shows commercial selling and most spec groups buying. No surprise.
As warehouse stocks drop, other KC spreads show strength, even as the market dropped. The OI in U is 103,597 lots, as of last posting, well above the N highest level and well above the beginning of the COT period. The reasons for the higher number is winter, anticipated shortages, daily withdrawals of warehouse stocks and the performance of the NU. The weather in Brazil is warm and dry and ideal for harvesting. It will cool in July. The fate of the market remains unclear as, in spite of the sharp drop, it remains within a range that has prevailed for a while. Funds will likely be sellers on Monday but trade support will be present as well.
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