The rally in Cocoa futures higher this week is all technical. Once 2560 price level broke, 2600 was the next price level traders needed for the market to close above.

Current weather conditions are supporting cocoa prices. Rain in key growing regions could cause supply issues.

Cocoa has been a macro trade of late. The December contract is range bound in this recent consolidation.

Looking at the December cocoa chart, two stories are being told – a supply and demand battle, and technical levels are guiding prices.

December cocoa futures are sitting on support. 2455 has held multiple times on the chart and has helped the contract recover back to the 2550-2600 range.

It appears the lows may have been put in the December cocoa futures contracts. Although the contract has hit overbought levels, the technicals and fundamentals are working together to get prices back to 2500.

December cocoa futures are attempting to rally but technically 2300 continues to be a level of resistance. Today’s close, above the 9-day moving average, should trigger follow-through on this recent move higher.

After four positive trading sessions this week in the December Cocoa futures, the contract took a pause and pulled back to the 2230 support level Thursday. Although most signs point to the potential of more upside, 2280 provided resistance technically. During Friday’s morning trading session, we saw this level hold again.

Production seems to be lower in cotton, so prices should move higher. Another factor that could come into play is the tropical storm Dorian headed for the coast. Cotton in Florida could be greatly affected.

By mid-March 2018, rhetoric regarding trade relations between the United States and China began to heat up. President Trump started this earlier in the year with an announcement of steel and aluminum tariffs. Later he focused more on China and Chinese officials responded in kind. The heated-up rhetoric seemed to be capable of starting a serious trade war in which each country would boost tariffs that would raise the cost of the other nation’s exported products.