Daily Analysis

Commodity markets have seen a huge rise since early October as the U.S. Dollar Index reached a 14-month low.  With the rate of decline seemingly slowing in the Dollar, softs markets have taken a pause from their recent sharp rallies.

Soft market traders are no doubt paying close attention to the position of the Dollar.  Activity out of China is particularly of interest because of the huge amount of U.S. Dollar reserves China holds.  Overnight the Dollar weakened versus the Euro and Japanese Yen as a report out of China called for the government to lighten up its Dollar reserve and increase the amount of Euros and Yen.

This slight weakness in the Dollar is leading traders to call for a slightly better opening in the Softs complex.

December Cocoa

December Cocoa's almost month long surge is directly related to the weaker Dollar. Friday's better close in the Dollar helped trigger selling pressure in cocoa, forcing a lower close and a reversal top formation. The top was formed at 3412. The formation suggests a break through 3348 confirms the top and sets up a possible 2 to 3 break to 3231 to 3188.

December Coffee

December Coffee surged earlier in the month and has spent the latter half of the month trading sideways to lower. This market is still in an uptrend, but the weaker Dollar isn’t having that great an effect on demand. Last week’s decision by the Brazilian government to tax financial transactions to stem the rise in the Brazilian Real currency is most likely causing the recent weakness. Based on the range of 125.30 to 145.40, traders should look for a break to 133.00 - 132.65.

March Sugar

March Sugar also hasn’t been a recipient of the weaker Dollar. This is most likely a sign that sugar is overpriced, thereby decreasing demand. The main trend is down. The new main top is 24.68. The main bottom is 21.18. Based on this range, this market could find some support inside of retracement zone at 22.93 to 22.52. Gann angle resistance should help stop a rally at 24.73.

December Cotton

The weaker Dollar has helped demand pick-up for December Cotton. The main trend is up, but this market appears to be consolidating. The pace of the uptrend appears to be slowing which is often indicative of overbought conditions. Concerns are being raised over a possible short-covering rally in the Dollar and an end to government stimulus in China. The short-term range is 60.59 to 69.49. This range makes 65.04 to 63.99 the next likely downside target.