Cocoa prices saw a move higher this week – with the May contract trading towards 2600. As Covid vaccines continue to be distributed, cases appear to be headed lower. If this pattern continues, look for more areas to lighten up restrictions and this should lead to economic growth. Cocoa specifically has been greatly affected by lockdowns. Chocolate companies continue to report weaker data during the pandemic as consumers shift their income towards necessities.
Looking at the currencies, a weaker Pound and stronger Euro has had little affect on this week’s cocoa rally. Cocoa appears to be trading more off its own fundamental hope and less off the macro picture as we have seen weaker equities this week.
Cocoa producing nations are deciding on whether they should come together to have more control of the supply side of the equation, but many are leery. This could cause issues on many levels – mainly with their local governments.
Technically, cocoa appears to be headed for 2700 in the May contract if vaccines rollouts continue to show that they are helping the public. Next week will be telling for the soft, if equities continue to move lower and currencies continue their volatility will cocoa continue its own trend higher?