4 April 2014

Weekly Market Report 4 April 2014


In our last report, we suggested that weather markets bring volatility. Last week’s price action supported this entirely. The previous week prices rallied strongly from the lows of 16.67 USc/lb, to the highs of 18.10 USc/lb, basis the May14 contract. Last week saw prices fall from the highs of 18.10 USc/lb, posting lows of 16.79 USc/lb by mid-week. Then, in comparatively ordered fashion, prices went on to post two sessions of moderate gains to close the week at 17.35 USc/lb. The market continues to wrestle with the competing fundamental pictures that are negative short term, and supportive longer term. The near term negatives of over supply are real. The longer term positives of potential problems with supply from various origins, particularly Brazil, are just that; potentials. Until the market has more certainty about the predicted El Nino weather pattern, along with replanting information on Thailand and India, the near term oversupply situation should keep prices somewhat in check. There is emphasis on the ‘should in that sentence, for the speculators may well see it otherwise.


The AUD/USD remained well supported last week, and proved unable to fall below 0.9200 mid week. US non-farm payroll data on Friday night came in only just below expectations and provided what appears to be a classic ‘sell the rumour; buy the fact’ trading scenario. Many speculators were reportedly selling Aussie dollars heading into the announcement of the NFP data, only to close those sold positions out following the release of the data (data which by most reports should have been supportive to the USD, not the AUD). Some analysts are predicting a continued improvement in the US labour data this year, as we move away from the more weather influenced data periods (March was still being affected by snowfall in the North-eastern regions). US stocks took a dive late in the week as well. On the other hand, emerging markets had a good week, with the Brazilian Real rallying strongly Friday night, and with good strength seen in the South African and Russian currencies as well. Confidence in the Aussie dollar continues to grow, as evidenced by the strength it has shown of late.