July ’20 cocoa futures start the day under pressure but respecting 2400 as an area of support. Prices have been volatile with demand sentiment swinging back and forth in the near term as global economies seek confidence for successful reopening. Regularly flaring tensions between the U.S. and China continue weighing upon near term demand from both regions. Although, the phased lifting of social distancing restrictions in many parts of the U.S. is longer term bullish. Gains in the euro offer strong positive influence upon this market as well. Fundamentally demand should begin returning as lockdowns lift, people go back to work, and life begins returning to some sense of normal. Supply is under continued weather pressure with extended dry growing conditions which supports a big picture bullish case. Looking at the weekly charts Jul ’20 cocoa has been hovering about the 2400 level in consolidation, with 2403 appearing to be resistance from early march. My analysis suggests a clean break above the price area would signal on oncoming bull run in cocoa. Strong volatility is to be expected in the near-future until the trend becomes decided. Pull backs could become bullish opportunities, unless there is a major bearish shift in fundamentals.

Cocoa Jul ’20 Daily Chart

Eric Scoles

Eric entered the workforce during the summer of 2007 as an apprentice tradesman just before the big crash and recession which followed. The impact of which strongly inspired his interest in the financial industry and began him as a student of the markets. Eric worked throughout the following years developing strong communication skills and risk management practices in the aviation and marketing industries before ultimately getting licensed and turning his passion into a career as a market strategist with RJO Futures.