The November contract reached its lowest level in seven sessions on Wednesday, signaling what may have resulted in a move into a downtrend, only to retrace its path and finish in positive territory, up $.70/mt to $492.70/mt. Price continues to hold well above the September 12 low of $482.50/mt while remaining in the upper one-half of the $16/mt range that has governed trade for a few weeks.
Wednesday's move comes despite weakness seen in both soybean oil and rapeseed. On Tuesday, the Environmental Protection Agency in the U.S. reported that the biodiesel blending requirement might be lowered for 2018, which resulted in heavy selling of soybean oil. The October bean oil chart shows price falling for the fifth consecutive session on Wednesday, finding support at the 61.8% retracement of the move from the June low to the September high.
Supportive features in the canola market are harvest delays in northern Alberta with NOAA charts pointing to the potential for moisture to hit the majority of the Prairies in day 4 through day 7 of the seven-day precipitation chart. Canadian dollar weakness also remains a factor, with Canada's spot dollar falling by three-quarters of a cent relative to the U.S. dollar to $.8023 CAD/USD. On Wednesday, Bank of Canada Governor Stephen Poloz stated that there is no predetermined path for rate hikes and that caution will be taken moving forward, rattling the mood of loonie traders when a third rate hike was expected to take place in December. The spot Canadian dollar has fallen 2.9% since its 27-month high was reached on September 8.
The Nov/Jan futures spread strengthened on Wednesday to minus $6.50/mt, which reflects 64% of the full carry as reported by the ICE Exchange and contrary to the move seen by the same spread for soybeans. This has remained steady at this level for some time, while DTN analysis views spreads which are above 67% of full carry as a signal of bearish fundamentals, as determined by the market actions of commercial traders. The sideways trend seen in momentum indicators on the daily chart and weekly chart (not shown) signal a wait-and see approach as harvest advances.
The lower study shows 24,613 November futures contracts trading on Wednesday, the second highest daily volume seen for this contract over the life of the contract. Since September 12, daily volume reported on days with higher closes has exceeded the daily volume reported on days with lower closes, with buyers still in control.
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