Sugar hits sweet spot as downtrend comes to an end

SINCE hitting a high of 23.90 in October 2016, sugar has been stuck in a brutal downtrend. It has fallen by 58 per cent over the past two years to the current low of 9.91. Nonetheless, the severe bearish sentiment in sugar might also be the reason for a significant rebound as the outlook appears extremely dreadful - and a short squeeze from the speculator perspective is imminent.

Despite the downtrend accelerating in August as sugar broke below the critical 10.00 psychological round number, the bulls stood ready to defend that level and succeeded in keeping the 10.00 psychological round number intact.

The market is clearly respecting the 10.00 psychological round number with the recent bullish rejection shown by the highlighted box. The historical price action around the 10.00 support area also signalled why that level is particularly important. Back in 2015 when sugar was also going through a relentless bear market, it was at the 10.00 psychological round number that halted the sell-off and initiated the uptrend in August 2015.