The #sugar market experienced a sharp -0.9c selloff today, breaking below the lower boundary of the well-established 3-month bearish trend channel. The movement reinforces the bearish technical outlook from moving avg trends (200-day is also bearish now) and tech signals.
On our latest COT analysis published this Monday, we noted that trend-following funds had a rationale for technical selling and plenty of capital available to do so, with their positions roughly matching the 5Y avg. The bearish breakout from the 3-month trend appears to be the trigger for a new wave of fund selling in sugar.
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The selloff is timely with a few bearish developments. On the macroeconomics side, we have the massive BRL (Brazilian currency) devaluation towards records lows of 6.20 today (historical minimum), concurrent with Oil selloff based on demand worries from China & Germany.
The BRL devaluation seems to be reactionary to Brazil's lack of fiscal commitment through expense cuts, and is further exacerbated by Trump's threats of trade retaliation over Brazil's high tariffs on US products. On top of macroeconomic headwinds, there's also the validation of a much improved Thailand crop.
The Office of the Cane & Sugar Board has started reporting 24/25 crush earlier this month, and #cane crush is progressing at a much faster rate compared to last season. As of Dec 15th, 4.25m tons were crushed. This is +82% more than 2.34m tons in 23/24. Data collected so far seems to verify a significant crop rebound YoY.
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Over a week ago, we alerted our clients about the potential for this selloff, when our scorecard value stood at 19.76c, approximately where prices are today (see the picture below).
To receive our value score reports and stay updated on the key #sugarmarket events that could impact prices and for a more in-depth analysis on it, check out our free trial of the Silver Plan at coffeetradingacademy.com. 📈☕ or e-mail info@coffeetradingacademy.com
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