November canola ended $3/metric ton lower, at $445.80/mt, in Wednesday's trade.
Following the July 5 contract low of $437/mt reached on the November canola contract, gains were realized in both Monday and Tuesday trade, with some help from Canadian dollar weakness. Wednesday's mid-week trade saw the November contract end lower for the first time in three sessions, after failing to sustain gains realized above $450/mt for the second straight session.
Resistance also lies at $452.50/mt, the 38.2% retracement of the move from the June high to July low, although this week's highs have roughly fallen $1/mt short of testing this level.
Wednesday's trade resulted in a higher-high for the second straight session, while achieving a four-day high which represents a positive technical signal of a change in trend. This move failed to sustain itself, with Wednesday's session ending with a bearish outside-day trading bar, trading both higher, then lower than Tuesday's trading range, while ending lower.
While not shown, total volume is estimated at 8,583 contracts this session, down for the third straight session as traders opt to sit on their hands in advance of this week's USDA report and Western Canada crop reports.
The first study points to the stochastic momentum indicators that have turned sideways near oversold territory on the daily chart, with a similar move shown on the weekly chart (not shown). The weekly chart (not shown) shows this week's trading bar consolidating within last week's range in sideways trade as traders take a cautious approach to trade ahead of this week's USDA report and the latest Western Canada crop reports.
The green line on the second study represents the new-crop November/January futures spread, which weakened $0.40/mt this session to minus $7.10/mt, the weakest seen since June 28. This is a sign of growing commercial bearishness due to an expected massive carryout, a continued lack of trade with China and improvements in Prairies' weather that has seen widespread precipitation. This represents the weakest spread calculated for this date in eight years, with the five-year average for July 10 at minus $3.62/mt and the 10-year average at minus $3.97/mt. Despite this calculation, this spread represents roughly 59% of full commercial carry and points to a neutral view of market fundamentals held by commercial traders.
The blue bars on the lower study indicate the net futures position held by noncommercial traders, which was reported at a net-short of 64,563 contracts, as of July 2, higher for the second consecutive week to the largest bearish position held in five weeks.
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