Cocoa Futures Double Whammy - Weak Demand and Equity Markets

March 26, 2020 12:25 AM
Cocoa futures tried to bounce off a potential bottom in the May contract
Disruption to cocoa operations and exports will affect prices short-term
Cocoa futures 2300 is resistance and 2250 is short-term support
Cocoa Futures Update

Cocoa Futures Update

Cocoa Futures Slump On Weak Demand and Outside Markets

Cocoa futures have been weakened by demand and the global equity markets. As the US and European markets moved higher for back to back sessions for the first time since February, cocoa tried to bounce off a potential bottom in the May contract.

Global restrictions and stoppage of work in key regions for cocoa have added to the pressure the market has been feeling. An uncertainty of when certain restrictions will be lifted should cause volatility in the coming weeks.

Looking Ahead

The safety and health of the world is the main concern of everyone and recovery in the markets will occur when limits are lifted at the proper time. For cocoa specifically, any disruption to cocoa operations and exports will affect prices in the short-term. As with all commodities, the supply chain is key right now.

Technical Outlook In Cocoa

From a technical standpoint, 2300 is resistance, while 2250 is short-term support. Prices that we saw at the end of February should be back once the Coronavirus is under control and numbers plateau but in the meantime, the soft markets are weak and vulnerable.

Price Chart of Cocoa Market

Cocoa Futures Price Chart
Source: Tradingview

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About the Author

Peter Mooses is a commodity broker at RJO Futures. He enjoys the analytical aspects of futures trading and appreciates the economic impact that commodities have across all markets. Peter utilizes market analysis and trends to help clients achieve a balance between risk and return, while always keeping their investment objectives top of mind. Follow Peter on Twitter @PMoosesRJO