MarketsFarm — The ICE Futures canola market posted steady losses for five sessions, testing the lower edge of their well-established trading ranges before finally uncovering some support on Wednesday.
The losses did damage from a chart perspective, with the activity bumping the trading window lower, according to an analyst.
“Overall, both on old- and new-crop, canola is in a lower trading window now,” Errol Anderson of Pro Market Communications in Calgary said.
On its own, he said there wasn’t much that would support a significant recovery in canola at this time of year, with the lower trading range likely to continue, barring some outside supportive news.
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“When you get a severe selloff like this, the market will typically recover 50 to 60 per cent of the loss (on a rebound),” said Anderson.
A 50 per cent recovery would take the old-crop futures back to the $820-$830 per tonne area, but anything above that would need additional supportive news, according to Anderson.
For the new crop, he placed the market in a range between $760 to $800 per tonne.
Looking beyond canola, “crude oil, to me, is overvalued,” said Anderson, adding that if crude starts to trend down, canola and other markets would also come under pressure.
Any weakness in crude oil would typically weigh on the Canadian dollar, and Anderson thought the currency was also vulnerable to the downside. While a weaker Canadian dollar would offer some support to canola, he expected the influence of the currency would only slow the downturn to some extent.
— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.
