Commodities Watch: Time for a sugar rush?

Round-up

The past week has seen some big moves in the commodities space, notably with sugar prices rallying 11.6% to reach a three-week high. That said, the recent surge follows after a 36% retracement from its November 2023 peak, with prices falling from a high of 27.75 cents/lb to as low as 17.73 cents/lb. Nevertheless, prices seem to be seeking for some reprieve with this recent rally, as previous extreme bearish sentiments seek to unwind.

Other commodities saw gains for the week as well, with palladium prices up 4.9%. Brent crude prices are up 3.0%, while cocoa prices are up 2.4%. Gold prices register a more subdued gain of 0.2%. A punch above resistance to an all-time high of US$2,531 per ounce in mid-August called for a near-term breather. Silver prices are seeing green as well, edging up 1.5% for the week.

New York Sugar No. 11: Time for a sugar rush?

NY sugar prices has punched to a three-week high this week, with the catalyst attributed to potential global supply disruptions caused by drought and excessive heat in Brazil's top sugar-producing state of Sao Paulo. Sugar cane industry group Orplana mentioned that there were as many as 2,000 fire outbreaks this weekend, with potentially as much as 60,000 hectares of crop area being affected.

Technically, a close above a downward trendline resistance may be significant, which raises the odds that sentiments are reversing from its extreme bearish state over the past year. Its daily relative strength index (RSI) has headed above its mid-line for the first time since in a month, following a bullish divergence formation on recent lower lows in prices.

Prices are likely to seek for a retest of its July 2024 high at the 20.66 cents/lb level, where its 200-day moving average (MA) will be put to the test. Any weakness will likely leave immediate support at the 19.36 cents/lb level on watch.

Brent crude: More clarity awaits with daily RSI back at mid-line

A more than 7% rally over the past week saw oil prices giving back some of those gains in today’s session. Uncertainty over supplies from oilfield closures in Libya and ongoing geopolitical tensions in the Middle East may be catalysts to keep prices afloat for now, but risk-taking on the broader scale is limited in the lead-up to Nvidia’s results and US macro data ahead. For now, its daily RSI is back to retest its mid-line, which it has struggled to reclaim on two previous occasions since July this year.

Brent crude prices may still eye for a retest of its July high at the US$88.00 level in the near term, but a break above this level seems hard to come by, without much reassurances around China’s economic recovery. China’s official Purchasing Managers' Index (PMI) read for August will be released this Saturday. It is likely that prices may remain stuck in its broad consolidation zone in place since November 2022, with the lower end of the range at the US$72.36 level on watch for key support to hold.