Canada Markets

Soybean Oil Pulls Canola Higher

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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January canola broke through resistance on Wednesday following a sharp move higher in soybean oil. Today's high of $532.50/mt took out resistance of the October high at $525.90/mt, while resistance remains overhead at $535.70/mt. The lower study shows that stochastic momentum indicators have failed to fully reach overbought territory, suggesting the move may not be finished. (DTN graphic by Nick Scalise)

Positive news came from the Environmental Protection Agency in the U.S. on Wednesday with increased targets for biofuel blending for 2017 in the U.S., a move that drove soybean oil to an almost limit-move higher and to a January contract high, while the continuous active chart shows the highest levels traded since July 2014.

Canola also reacted favorably, closing above resistance of $525.90/metric ton, while today's $532.50/mt high neared a test of the contract high of $535.70/mt reached June 15. The move was a convincing one, with an estimated daily volume of 61,219 contracts trading, up from just 21,784 contracts which traded on Tuesday. Weaker spreads in the nearby months point to speculative activity behind today's move.

In addition to the resistance faced at the contract high of $535.70/mt, the continuous active chart points to the May 2016 high of $544.60/mt (not shown) as well as retracement resistance at $552.80/mt as future potential targets. The latter represents the 61.8% retracement of the move from the September 2012 high to the September 2014 low. A move above this level could result in a further move to $566.60/mt.

Also of interest, total open interest for canola was reported at 218,018 contracts as of Nov. 22. This should be a record for this date, and is 28% higher than the five-year average. As well, open interest for the January contract was reported at 145,806 contracts, making up 67% of the total open interest, while on average over the past five years, the January open interest for this date made up only 55% of the open interest.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

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