March cocoa futures hit a multiyear high last week as the market attempted to touch 3000. The supply side of the fundamental equation is bullish. Weather premium is in prices due to patterns in West Africa. Harmattan winds tend to affect the crop this time of year, this mixed with the dry season coming to an end, could see production data down. These factors have provided support for the traders who are long.
The weakness and uncertainty in demand has not allowed prices to cross 3000. If demand were to increase, 3200 is attainable. Asian grinding data will be a good indicator moving forward. With the Coronavirus and that region of the world not functioning normally (with imports and exports mainly), how long the market will be negativity impacted by the virus is anyone’s guess.
Technically in the short-term a close above 2915 is needed to reaffirm the move higher. If these current levels fail, a drop back down to 2850 isn’t too far-fetched. The COT data being released Friday after the close will show us if we are in store for some more long liquidation.