The November canola contract broke resistance of the contract's 20- and 50-day moving averages on June 15, while follow-through buying pushed price higher in June 15 trade. Weakness in soybeans, palm oil and rapeseed were overlooked, while support stemmed from gains realized in soybean oil futures along with a weaker Canadian dollar trade early in the session.
The November closed $0.70/metric ton higher at $473.70/mt, reaching a three-week high on the weekly chart although faces fresh technical challenges on the new crop chart, with resistance ranging from $475.80/mt to $476.50/mt.
The downward-sloping blue line represents the upper-boundary of a triangle consolidation pattern which has been in place since mid-March, with resistance calculated at $475.80/mt. In addition, the horizontal red line reflects the 38.2% retracement of the move from the January high to March low, which is calculated at $476.10/mt. Finally, the downward-sloping green line represents the contract's 100-day moving average at $476.50/mt.
A move above this range of resistance could result in a further move to $480.70/mt, the 50% retracement of the already discussed 2020 downtrend, while the contract's 200-day moving average is seen at $481.10/mt.
The blue bars of the histogram on the second study of the attached chart shows noncommercial traders reducing their bearish net-short futures position in the week ending June 9 and for four of the past six weeks. This remains a supportive feature for canola, while the red bars show the commercial side continuing to hold a net-long position as the same period.
The lower-study shows the November/January spread narrowing $0.30/mt in Monday's trade to minus $5.90/mt (Jan. over the Nov.) the narrowest spread seen in more than one month. Monday's spread represents roughly 49% of the full cost of carry, which could be viewed as a neutral spread overall.
Today's November contract closed higher along with soybean oil and crude oil futures. Meanwhile, there remains enough uncertainty in the market for canola to keep speculators on their toes. Recent Statistics Canada reports, including seeded acres and March 31 stocks, came with a caveat that pointed to a truncated producer survey due to the COVID-19 pandemic. There is a small number of acres of crop from 2019 that may not be harvested in the western Prairies, while there is a small number of acres that will not be planted due to wet conditions.
Meanwhile, both crush and exports are running ahead of the pace needed to reach current AAFC forecasts, which may be updated this week. This weekend's hailstorm in central and southern Alberta likely wiped out some acres of canola, while areas of southern and eastern Saskatchewan have seen as little as less than 40% of normal precipitation in the April 1 through June 14 period, although may see some precipitation in the week ahead.
The potential for continued short-covering exists and how this contract acts as it approaches resistance bears watching.
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Cliff Jamieson can be reached at firstname.lastname@example.org
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