The cocoa market started the week with some choppy trade and tested Friday’s recent high of 2471. Ever since the market recovered from May 15th’s spike lower it has been in a steady trend higher. Global demand has remained strong despite weaker outside markets, but a positive shift in global risk sentiment would support a continuation of the trend higher. Below average rainfall in key African growing regions this past week is also a bullish fundamental shift for the market. Strong grinding numbers look to continue with quarterly numbers from Europe up 3.3% from the same time last year. Until recently, production was estimated to reach near record levels, but with the current weather forecast looking to adversely affect output and increases in grinding numbers, we could see more balanced world numbers. Fundamentally, the cocoa market has support and could continue the move higher if it can break through this current resistance level. From a technical standpoint, the market has failed to build any longer term move and has been in a larger, sideways channel since the start of 2019. If the market breaks 2400 in the September contract look for trade down to support at 2250-2300.
Cocoa Sep ’19 Daily Chart