Cocoa price analysis: Levels to watch in a swaying market

Cocoa price gave up some of the week’s gains on Thursday amid a stronger US dollar. In the previous session, the agricultural commodity has edged higher to trade at a 5-week high. On the one hand, the confirmation of the El-Nino weather pattern is offering support to the prices. However, a stronger US dollar and expectations of ample supply from leading producers like Ivory Coast and Ghana have been curbing its upside.

Cocoa price erases gains as the US dollar strengthens

Cocoa futures in the New York trade eased on Thursday after recording a five-week high in the previous session. In recent sessions, prices have been volatile while remaining range-bound. 

On the one hand, a stronger US dollar has rendered the asset more expensive for buyers holding foreign currencies. On Thursday, the dollar index extended its previous gains as the market digests the latest Fed interest rate decision. More specifically, the US central bank left interest rates unchanged as inflation remains above its target of 2%. 

Nonetheless, the confirmation of the El Nino weather pattern is offering support to cocoa prices. According to Japan’s Meteorological Agency, the conditions have already formed across the equatorial Pacific. Besides, the US National Oceanic and Atmospheric Administration (NOAA) has placed the probability of a Super El Nino in 2026 at 67%. This would be one of the strongest on record. 

In key cocoa growing regions within West Africa, El Nino is set to cause drier and warmer conditions which will in turn stress the cocoa trees and lower crop yields. What’s more, the 2026/2027 cocoa crop in the region has been faced with below-average cherelle formation. This has dampened the outlook of the main harvest season set to commence in October. 

Cocoa price technical analysis

Cocoa price is on track to record a weekly gain after being in the red for four out of the past five weeks. Cocoa futures in the New York trade have recorded volatility while still being range-bound. 

In the previous session, it hit a one-month high at $4,411 per metric tonne. It has since eased to $4,254 as at the time of writing.

A look at its daily trading chart signals subtle gains and curbed losses in the short term. To begin with, it has held steady above the short-term 25-day EMA and the medium-term 50-day EMA. Indeed, the bullish golden-cross pattern formed in early May is still in place. 

On the one hand, these technical indicators point to further gains. However, at an RSI of 60, cocoa price movements will likely remain close to the neutral zone of 50. In the near term, the bulls may lack enough momentum to bolster the prices to the overbought territory of 70. 

In line with the technicals, the range between $3,937 and $44,90 is worth watching. A pullback past that range would invalidate this cautious thesis while activating the lower support at $3,779. On the upside, further gains may be curbed along the resistance level of $4,582.