Initially, after the UK Parliament decided not to put a deal in place for the Brexit and delay it for another 3 months – the currencies mainly affected by this decision, the Pound and Euro moved higher. The risk tone was lowered in the UK and Europe leading to traders taking this news as a possible positive for the demand in cocoa. This demand idea was countered by the supply levels anticipated in West Africa, which provided a bearish feel. These two sides created a trading day which left us almost where we started the session.
Technically, now we must watch the 9-day moving average, a continued close above this level will help this short-term trend to continue. For this market to gain some follow-through, a close above 2265 is needed over the next few days.
Traders will now monitor the COT data release Friday as well as the upcoming grinding data. These releases should give us more guidance on the demand in the soft.
Cocoa May ’19 Daily Chart
If you would like to learn more about soft futures, please check out our free Fundamental of Softs Futures Guide.