Canada Markets

November Canola Reaches a Three-Month High

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The November canola contract settled higher for a fourth session, while closing above the 50% retracement level. The second study shows the Nov/Jan futures spread, which has narrowed $1.70 per metric ton (mt) this week to minus $4.80/mt. The blue bars of the histogram on the lower study shows noncommercial traders paring their bearish net-short position over the past two weeks. (DTN ProphetX chart)

November canola settled higher for a fourth session on Wednesday, ending $26.70 per metric ton (mt) higher at $763.10/mt. Continued dry conditions across much of the prairies, strength seen in soybeans and soybean oil futures, strength in crude oil and continued weakness in the Canadian dollar remain supportive features.

Wednesday's move saw a fresh three-month high reached at $764.80/mt, with what may be viewed as supportive buying from the commercial and noncommercial side. It is interesting to note that selling action weighed heavily on prices to trim gains in July 4 trade, while late-session buying interest led to a sharp gain on July 5.

Wednesday's close landed above the 50% retracement of the move from the November high to the May 31 low, calculated at $748.90/mt, while also settled above psychological resistance at $750/mt. This could clear the way for a continued move to the 61.8% retracement at $781.30/mt, although it will require a breach of the contract's 200-day moving average at $772.50/mt.

The brown line on the middle study shows the Nov/Jan futures spread narrowing $0.30/mt to minus $4.80/mt, close to its narrowest spread seen since May 25. This spread has narrowed by $1.70/mt in the two sessions this week, continuing to correct from the minus $7.50/mt reached on June 15.

The histogram bars on the lower study show the noncommercial net-short position pared for a second week to 32,154 contracts as of June 27, the smallest bearish position seen in 23 weeks or mid-January.

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