By IFCMarkets
Probable upward reversal
Let us consider the continuous SUGAR CFD on the daily chart. Australian Bureau of Meteorology said the chances of El Nino had been getting higher in recent two weeks. It may result in bad weather in Asia and Latin America and lead to decreased forecasts for basic crops. Coffee prices dropped to their three-month lowest due to the Brazilian real strengthening to the US dollar. We assume that currency market situation may drive up sugar prices as well. Brazil produces more than one third of world coffee and one fourth of sugar. Last week sugar quotes recorded a new low since 2008. Meanwhile, the Green Pool Australian marketing Agency raised in August the global sugar deficit forecast in the season 2015/2016 to 4.6mln. tons as compared to 2.8mln tons in the May report. The main reason was the growing sugar cane ethanol production in Brazil. Moreover, the country has started to export ethanol for the first time since 2012. It is worth mentioning that the supply is not that large yet. In the first half of the year Brazil sold 11.25 thousand tons of ethanol.
On the daily time frame the SUGAR CFD has been trying to rebound from its 7-year low, recorded last week. In mid-January it reached the current year high and slumped 30%. At the moment the futures is traded below the 200-day Moving Average. Parabolic and MACD have formed the first buy signals. RSI-Bars tends to grow but has not yet crossed 50. Bollinger bands have not yet started expanding, which may indicate low volatility. A bullish momentum may develop if the SUGAR CFD bridges two latest fractal highs at 12. A stop loss may be placed below the seven-year minimum and the lower Parabolic signal at 10.9. After pending order activation the stop loss is supposed to be moved every day to the next fractal low, following Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most cautious traders are recommended to switch to the H4 time frame and place a stop loss there, moving it after the trend. If the price reaches the stop loss without triggering the order, we recommend to cancel the position: the market sustains internal changes that were not considered.
| Position | Buy |
| Buy stop | above 12 |
| Stop loss | below 10.9-10.8 |
Market Analysis provided by IFCMarkets