What the greenback does ultimately the cocoa market does the opposite. This is not definitive but if you were to overlay the 2 charts it would look like a mirror image. Being the US dollar has appreciated 3.2% in the 3 weeks it is no surprise that cocoa has depreciated 7.8%. Of course there are other underlying factors such as a large crop and potential seasonal factors, lack of demand, etc. What I have noticed over the years is there is an inverse relationship…I am not of the opinion this could be used on a day trade or scalps but for overall trends their seems to be an inverse relationship.
That being said I do feel the dollar is overextended to the upside and cocoa to the downside. I have advised scaling into bullish exposure in recent weeks. Stockastics on the daily chart as seen above are screaming over sold and as of this post we are probing the 9 day MA; identified by the red line. Further confirmation would play out on a trade above the 20 day MA; identified by the light blue line.
While I am not as bullish as I was several weeks ago I do still see it a viable possible we trade north of 2300 in May futures I the coming week/months.
To discuss in more detail this chart or any other you can reach me at: mbradbard@rcmam.com or 954-929-9997
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