Cocoa Futures Weekly Forecast with Forex Fundamental Analysis & Market Sentiment (3-9 December 2023)

Posted by Clara Mellor on 06:41 with No comments

The difference between success and failure in Forex / CFD trading is highly likely to depend mostly upon which assets you choose to trade each week and in which direction, and not on the exact methods you might use to determine trade entries and exits.

So, when starting the week, it is a good idea to look at the big picture of what is developing in the market as a whole, and how such developments and affected by macro fundamentals, technical factors, and market sentiment.

Read on to get my weekly analysis below.

Fundamental Analysis & Market Sentiment

I wrote in my previous piece on 26th November that the best trade opportunities for the week were likely to be:

  1. Long of the NASDAQ 100 Index. This rose by 0.22% last week.
  2. Long of Cocoa futures. This rose by 1.72% last week.

These trades produced an overall average win of 0.82%.

Last week was again dominated by a rise in risk-on sentiment which gave a tailwind to a further decline in the US Dollar, which arguably has established a new long-term bearish trend, and also a rise in US stock markets. Some gauges of investor risk sentiment reached their highest levels in almost two years, but Friday saw Fed Chair Powell cast doubt on the prospect of rate hikes in the near future, leading to a risk selloff at the end of the week.

There were several important data releases last week which impacted the market.

US Preliminary GDP data came in higher than expected, at 5.2%, while the US Core PCE Price Index came in as expected. Perhaps most importantly, German, Spanish, and Australian inflation data were all lower than expected and falling. This set of data helped boost risk-on sentiment.

The other major data release last week was the Reserve Bank of New Zealand’s policy meeting, which saw rates left unchanged at the relatively high level of 5.50%, but the bank made a hawkish tilt by leaving open the prospect of further rate hikes within the current cycle, which boosted the New Zealand Dollar.

Other important data releases within last week’s schedule were:

  1. Chinese Manufacturing PMI – came in very slightly lower than expected.
  2. OPEC Meetings – production cuts were agreed, but crude oil prices fell regardless.
  3. Canadian GDP – came in very slightly higher than expected.
  4. US CB Consumer Confidence – came in slightly higher than expected.
  5. US Unemployment Claims – came in as expected.
  6. US ISM Manufacturing PMI – came in very slightly lower than expected.
  7. Canadian Unemployment – came in as expected.

The Week Ahead: 4th December – 8th December

The coming week in the markets is likely to see a lower level of volatility, as there will be fewer highly-important data releases, excepting the impactful US non-farm payrolls numbers. This week’s key data releases are, in order of importance:

  1. US Non-Farm Payrolls, Average Hourly Earnings, and Unemployment Rate
  2. Bank of Canada Rate Statement and Overnight Rate
  3. RBA Cash Rate and Rate Statement
  4. US JOLTS Job Openings
  5. US ISM Services PMI
  6. Swiss CPI (inflation)
  7. US Preliminary UoM Consumer Sentiment
  8. Australian GDP
  9. US Unemployment Claims
  10. Chinese CPI (inflation)

Cocoa Futures

Cocoa futures have been in a strong bullish trend for over a year now and made another strong rise last week. The price chart below applies a linear regression analysis to the past 62 weeks and shows graphically what a great opportunity this has been on the long side.

The weekly candlestick was again very bullish.

It is always a bit aggressive to enter without a pullback, especially right now with the price action above the upper band of the linear regression channel, but this is a strong trend that shows no sign of stopping on ever-increasing global demand for the superfood cocoa.

Trading commodities long on breakouts to new 6-month highs has been a very profitable strategy over recent years.


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