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News on Friday that India will allow duty-free imports of white sugar and also remove the rule that imports of raw sugar needs to be followed by the export of sugar within two years helped to support the market overnight. The July sugar managed to see follow-through technical buying from the bullish action on Thursday and the rally pushed the market above a recent downtrend channel which is also supportive. July sugar managed an upside price extension on Thursday with the market finding support from a more optimistic macroeconomic view tied to the rally in equity and oil markets and also early weakness in the Dollar. A re-inflation psychology seemed to be attractive to fund and speculative buyers who are migrating back to sugar. Chart based buying also seemed to give July sugar a technical lift as the market appears to have put in a quasi double bottom near 12.74 last week. We also suspect expectations for the Indian government to allow tax free sugar imports kept the market underpinned during the session since a decision on this issue was expected on Friday. Positive news, positive technical action and the short-term oversold condition of the market are all seen as supportive to a short-term uptrend for sugar. The Commitment-of-Traders report on Friday showed a massive long liquidation trend from speculators for the week ending April 7th. Speculators reduced their net long position by a whopping 25,132 contracts for the week to a still hefty net long position of 109,213 contracts. Index funds were net buyers which might be seen as a positive and speculators have already cut their net long position by more than 50,000 contracts in just a few short weeks so the liquidation may be near complete. India has removed a 60% duty on up to 1 million tonnes of white sugar and this should spark more activity in the cash market this week. The earlier than normal harvest in the center-south region of Brazil has traders a bit nervous with extra supply but average yields are reportedly lower as rains have diluted sugar content.
TODAY’S GUIDANCE: The turn up in the market over the weekend leaves 13.42 and 13.26 as support levels for July sugar with 13.57 resistance and then 14.09 and maybe 14.59 as upside targets.
