Cocoa futures retreated on Thursday after touching a five-week high in the prior session, as a strengthening US dollar made the commodity more expensive for foreign buyers. The pullback comes amid a period of heightened volatility, with prices remaining range-bound in recent weeks.
Dollar Strength and Fed Decision Weigh
The US dollar index extended its gains on Thursday as markets digested the Federal Reserve's latest decision to hold interest rates steady, citing inflation still above the 2% target. A stronger dollar typically pressures dollar-denominated commodities like cocoa, reducing demand from holders of other currencies.
El Niño and Supply Concerns Offer Support
Despite the headwind from the dollar, cocoa prices found support from the confirmed arrival of El Niño conditions across the equatorial Pacific, as reported by Japan's Meteorological Agency. The US National Oceanic and Atmospheric Administration (NOAA) has placed a 67% probability of a Super El Niño developing in 2026, which would be one of the strongest on record.
In West Africa's key cocoa-growing regions, El Niño is expected to bring drier and warmer weather, stressing cocoa trees and reducing yields. Additionally, the 2026/2027 cocoa crop in the region has experienced below-average cherelle formation—young pods that fail to develop—dampening the outlook for the main harvest season starting in October.
Technical Levels to Watch
Cocoa futures on the New York exchange are on track for a weekly gain after four of the past five weeks ended in the red. The commodity hit a one-month high of $4,411 per metric tonne on Wednesday before easing to $4,254 at the time of writing.
On the daily chart, prices remain above both the 25-day exponential moving average (EMA) and the 50-day EMA, with the bullish golden cross pattern from early May still intact. However, the relative strength index (RSI) at 60 suggests momentum is neutral, and a move into overbought territory (above 70) appears unlikely in the near term.
The key range to monitor is between $3,937 and $4,490. A break below this range could invalidate the current cautious outlook and open the door to support at $3,779. On the upside, resistance near $4,582 may cap further gains.
For context on broader commodity trends, see our analysis on Copper Posts Third Weekly Gain Amid Fragile Ceasefire; Key Technical Levels in Focus and Commerzbank Cuts Oil, Gas Forecasts but Sees Prices Above Pre-War Levels Through 2027.
This article is for informational purposes only and does not constitute financial advice.
