Looking at a July cocoa chart, you can see the lack of direction. After a recovery in May, most of the rally has been given back. Recent consolidation has traders confused on cocoa’s next move. 

Certain areas of the world are anticipating an increase in demand as Covid-19 restrictions are lifted, but others are left with the possibility of restrictions being tightened once again. Most of this depends on the availability of vaccines in various parts of the world. 

Cocoa supply doesn’t appear to be a problem. Exports are ahead of last season. Weather could become an issue— with little rain expected and high temperatures, mid-crop could be negatively affected. The currencies may also help cocoa find support at these levels. 

As we reach oversold levels, we’ll see what the COT data shows us this week, as well. Look for support to hold at 2385; if this occurs, a bottom may have been reached.

July Daily Chart

Source: Tradingview

If you are interested in discussing the soft commodities contact pmooses@rjofutures.com. 

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