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July sugar has seen a wide consolidation in the 15.00-16.00 range for most of this month and we can not rule out a resumption of the uptrend into the end of the month. The market seems to have absorbed news of less aggressive buying from importers due to high prices this week and the strength in the energy complex should help provide a base of support for an eventual move higher. We would believe the market needs more than a shallow break to alleviate the overbought condition but outside market forces seem positive and fund buying has been the over-riding factor. One obstacle is the extreme overbought technical condition of the market basis the COT report and traders will monitor this report tonight for impact next week. India millers suggest that beginning stocks for the 09/10 season will be higher than previously indicated when assuming 2.5 million tonnes of imports. Stocks are now estimated near 5 million tonnes from fears of 2 million previously. The fast start to the Brazil center-south harvest is also seen as a reason for the market to consolidate this month. The sugar market came under early selling pressure yesterday and July managed to take out Wednesday’s lows but shallow support held and the market pushed sharply higher on the session. A slowdown in the energy market break, a weakening US dollar on the session and increased inflationary fears helped to provide underlying support. Ideas that new buyers in the cash market are afraid to increase coverage after the recent surge in prices helped to knock the market off of the highs Tuesday and July fell 80 points before finding support as the market approached the 15 cent level. News of normal monsoon activity approaching India and talk that planted area will be up this season helped ease fears of tightness and contributed to the early break. Speculative buyers emerged on the break, however, and the buying seemed to accelerate late in the session. China imported 184,114 tonnes of sugar in April, up 34.9% from last year and this pushed the 4-month total to 498,001 tonnes, up 82.7% from last year.
TODAY’S GUIDANCE: Funds continue to emerge as buyers on shallow corrective breaks to support.
TODAY’S MARKET IDEAS: A close over 15.60 for July sugar would be supportive and leave 16.46 as next upside target. A close back under 15.46 turns the pattern neutral to negative.
