CFTC COT Forex Weekly Report | 07-03-2021

By Leo Hermoso Articles 07/03/2021

Hello, my dear friends! It’s good to be back here. New president, new coronavirus, but the same old Leo, so let’s go to the business.

COFFEE

One thing I am learning is how commodities have memory for price, and I think, the reason for that is the players remain roughly the same overtime. I am pretty sure you got the alert for the pending and the filed order for coffee in the trading room.

Now about, the memory I was talking about, I aimed for most recent price action, but check how traders were waiting to sell in the same zone the did in 2017 and 2020. Extending our analysis into COT data we will see a similar non-commercials behavior(would be best to analyze commercials here).

When news hit the wire telling something is expensive, it’s a good idea to cash long and place some shorts, and the reason for this is producers and retailers are no longer able to pass along the price to final consumers. I found an interesting article arguing something similar.

“‘There are supply constraints, not because of production, but simply hurdles brought upon us by COVID-19 and safety guidelines. It is a systemic issue,’ said Jorge Cuevas, an executive at Sustainable Harvest Coffee Importers in Portland, Oregon.
“‘It is now more expensive than in the last five to 10 years to bring coffee to the consumer,’ Cuevas said.

I am already short and with a small profit locked, you would know this if you are a subscriber. If I am right about my reasoning we should see two scenarios, a fast drop to 100 USD region or a slow drop that can take more than a year to happens aiming 95 USD region, but in both scenarios price can never to above 145.00.

Price Charts

COT CHARTS

Seasonality

COFFEE — Non-commercials net positions change.

Cot Data

COCOA

Using our beloved text summarization tool I got some interesting excerpts and one of them caught my attention:

All commodities in sharp deficits except for gold, zinc, and cocoa Jeff Currie of Goldman Sachs was back on CNBC today, and he noted how all of the other commodities aside from gold, zinc, and cocoa are in sharp deficits due to demand recovery and inadequate supply. Ivory Coast sells almost 100,000 T of 2021/2022 cocoa at small discount Ivory Coast started selling cocoa contracts for the 2021/22 season two weeks ago, six months later than usual, because it needed to clear stocks from the previous harvest, sources from the industry regulator and exporters said on Tuesday.
The sector regulator in the world’s top producer, the Cocoa and Coffee Council (CCC), has sold between 80,000 and 100,000 tonnes, with a discount of 100-200 British pounds ($139 -$278) on the premium for cocoa from Ivory Coast, the sources said. Raw commodities such as coffee, cocoa, cotton, and refined sugar are generally shipped via shipping containers, while corn, beans, and raw sugar are hauled in bulk carriers.

With just a few exceptions, when non-commercials players start the year in the selling mode the trend persists till the least July.
Non-commercials added to long on last week, but even with this buying pressure, commercials stepped in and pushed price down.
Half-life projection is telling us the bullish cycle is ending this week.

It’s a selling opportunity for us. I already have some pending orders, but I will take action at Monday opening.

COT CHARTS – SEASONALITY

HALF-Life Projection

Summarization Tool Results

GASOLINE RBOB

Our hit rate for gasoline is extremely high, the last post we(me and the bots) was about a possible bottom, now the signal we have is for a continuation of the uptrend, exactly at a pivot point! I am also sharing the following find I made using the summarization tool:

We said that gasoline prices would exceed $3.00 a gallon for the national average, now others are as well. With refiners unable to process crude, gasoline and distillate inventories also dropped dramatically, especially in the Gulf Coast region where their declines set records, the U.S. Energy Information Administration said Wednesday.
“That uses a lot of gasoline.” With refiners unable to process crude, gasoline and distillate inventories also dropped dramatically, especially in the Gulf Coast region where their declines set records, the US Energy Information Administration said Wednesday. Finished gasoline and blending components inventories both decreased last week.