SUGAR MARKET OVERVIEW

Sugar continued the relentless slide lower over the last week with October making new lows most days. We have been hearing of producer selling just above the market and when the liquidity wasn’t there in the outright position, they were selling in the Oct/Mar spread to be able to move the required volume. By any metric #11 is oversold, but the selling we are seeing currently is people being forced to market not opportunistic selling. Could this keep going even though we have fallen over 30% from the highs? Yes, but when the forced selling is cleared the scope for a short covering rally would seem a strong possibility. The market has completely discounted any bullish factors at the moment which is always a dangerous position. The bullish factors have not gone away, it’s just no one is talking about them at the moment.

CURRENCY MARKET OVERVIEW

After months of sideways action AUD/USD has clearly broken lower, and not even a short-covering rally into the FOMC was enough to test old breakdown level. Whilst the Fed really didn’t surprise market participants the USD continued to strengthen. There isn’t a lot of data (either internationally or domestically) to influence the currency markets and the macro landscape (geopolitical risk and weak commodity prices) looks very similar to the previous few months. The first technical target we were looking for in AUD/USD has almost been achieved at 89c. Given the length of the sideways move earlier this year, some overshoot to the downside is quite possible and we are looking for lower levels to add to hedging. USD/BRL has followed with the USD move clearly breaking higher. The next obvious target there is 2.40–2.42.