This week’s comment finds the now prompt October sugar contract pulling back from a recent test of the 13.00 level. Healthy pull back as the market gathers itself for a new move higher or withering rally attempt dying on a declining volume vine? Could be too early to call this rally over, but while the Brazilian currency continues to show strength, price weakness casts suspicion on the ability of sugar to maintain an upward tilt.
Fundamentally, the voices calling out for declining production in 2019/2020 are getting louder. Continued offtake of cane for ethanol in Brazil is supportive and the recent halt to the energy price decline doesn’t hurt either. Technically, sugar is testing the 50-day moving average. If the October contract is unable to hold this level, 12.59, the path of least resistance could be lower. 12.31 looms large as a level the market could gravitate to. While price action has the October contract back in a neutral or a trendless stance, a move below 12.31 in the October contract will have the potential to ignite selling and re-establish the down trend. However, talk of a down trend is premature before we answer the question asked by the 50-day moving average, especially with the funds still short, according to the COT. Stay nimble and don’t be afraid to take profits should you have them.
Sugar Oct ’19 Daily Chart