Arabica closed the week with a strong performance, 138.50, +2.35, while Robusta gained $8 to close 1416 as both markets saw heavy volume on the breakout. Futures were in quiet ascent early with the Dollar index a tailwind as technical buying carried prices. While not an uncommon driver necessarily, the DXY appeared to be an unusually strong catalyst for KC on the day as prices marched in lockstep for much of the session. A triple failure to extend gains convincingly through 140, peaking at 140.20, ultimately led a pullback as KC decline from 9:50 to 10:35 with rare room for the longs to breathe. However, somewhat remarkably, rather than maintain negative prices Arabica reengaged with FX proxy trade and rallied for the balance of the trading day with scarce pause. On a weekly chart KCN now has 3 weeks of impressive higher highs, higher lows, positive closes following the April 9th weekly outside reversal higher. Spreads also performed well in aggregate; while NU was unch at -1.90, the NN gained 20 points to -7.25. Robusta KN went out unchanged at -29. First notice day is this coming Tuesday, April 27th, leaving Monday the final opportunity to clean up unwanted positions.
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Macro correlations give and macro correlations take – that was the theme (see below chart) for today’s price action as KCN closed 143.00, -2.85 and RCN fell $16 to 1452. After the DXY drove prices tick to tick last Friday, and the BRL / BCOM did the same yesterday, the Softs basket was the featured trade for today as the Sugar, Cotton, and Coffee markets found precious little separation. With all three markets (as well as the Ag complex in general) well overbought entering the day a correction was due and the market received it; Cotton was the worst performer on the day, Coffee 4th, and Sugar 6th, with only modest gains in a triumvirate of grains saving Ags from uniform losses. Volume was similar to yesterdays – above recent averages but well off immediate extremes – and volatility was high intraday. Spreads were effectively unchanged, gaining a tick in the spot, losing one in the 1 year, yet the aftermarket pendings print raised eyebrows as an additional 40,736 bags were put up for grading, bringing the current total to 116,586. The increase was the largest one day change since Jan 2, 2020 (nearly 17 months), and the total is the largest since Feb 4th. With so much fluidity in markets and liquidity looking for homes, a roughly 12% gain for Ags in April (14% for coffee), and a sense amongst many coffee traders that the moves has been too much, too fast, tomorrow’s month end trading should be interesting.
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