Canada Markets

Given the threat faced with the record U.S. soybean crop followed by a record South American crop, canola has showed remarkable resilience since reaching its March 2 high of $472/ton. Since March 6, July futures have remained almost entirely above the 38.2% retracement of the move from the Dec. 4 low of $408.60/mt to the $472/mt high reached on March 2, found at $447.80/mt.

Wednesday's close ended below this support at $447/mt, while Thursday's $0.50/mt loss resulted in a close at $446.50/mt. Each day this week has seen trade move up to the contract's 20-day moving average, which is trending lower, only to fail to test this resistance while instead closing near to lower the end of the day's trading range. Three of the four days this week has seen the daily bar result in a doji candlestick, where the session's open and close are equal, or close to it, and result in a symbol representing a cross. This is a sign of market of indecision as traders explore both higher and lower levels only to end up where they started, although the three dojis this week indicate a close at the lower end of the range which could be viewed as a bearish signal as prices are failing to hold at the session highs.

Thursday's modest loss of $0.50/mt was realized despite a half-cent drop in the Canadian dollar this session. A 6% increase in the Canadian dollar over the course of the month to an April 29 high of $0.8366 CAD/USD has been problematic for the canola market. Combined with soybean oil weakness over the course of this week, the Canadian Canola Board Margin Index is reported at $67.96/mt this week, down from $88.45/mt a week ago, $92/mt a month ago and $194.23/mt this time last year, as reported by the ICE Exchange.

The lower study shows the July/November inverse weakening over time. Trading as high as a $13.20/mt inverse on March 24 (July over the November), this spread has trended lower since, with this inverse seen at $8/mt over the past two days as old-crop price weakens in relation to new crop.

Given continued weakness, Fibonacci retracement theory would suggest a further move lower to test support at $440.30/mt, the 50% retracement of the uptrend previously discussed. As seen on the attached chart, this level was previously tested on April 17 when price dipped to a low of $439.80/mt.

Friday's reports include stocks and export data from the Canadian Grain Commission for week 38, as well as the weekly Canadian Oilseed Processors data highlighting the weekly crush for the major processors. May 5 is the next Statistics Canada report which will report on March 31 stocks.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

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