London cocoa prices closed lower on Tuesday as speculators either got rid of longs or added to their shorts but failed to create any significant crack in the recent support area, which kept recent 29-month continuation lows insulated, dealers said.
But the broader outlook was for a weaker market targeting 750 pounds per tonne and where gains should only be temporary.
"I would say the momentum in the market is still very much to the downside. There is nothing out there to say that the funds will stop selling, I think they can still put some more pressure. I don't think the market will collapse but I think it will slowly erode south," a trader said.
Front-month May closed 14 pounds lower at 798 pounds a tonne, having moved 2,857 lots between 812 and 797.
This contract hit a 29-month low at 788 last week.
July closed 12 pounds down at 807 on 2,999 lots.
Technical analysts said the forecast was for a lower market but the weakening process would be slow and that the pressure would gradually eat support away.
Fundamentally, forecasts for Ivorian production indicate a healthy harvest this summer after a large main crop, with farmers saying on Tuesday rainfall data in the cocoa regions was mixed in the first 10 days of April but sunshine was strong and could help development of the mid crop.
World top producer Ivory Coast is moving between the main (October-March) and the mid crop (April-September), with little left to sell for now, while Ghana has already sold forward significant amounts for the coming season and should not return to the market in the short term.
Recent lows not seen for more than two years ago kept many sellers at bay awaiting any rally to place their offers.
Support from the European industry remained thin as sterling hit a 14-month high against the euro on Tuesday and made cocoa prices relatively more expensive for euro-based buyers.
Traders expected the European quarterly grinding figure this week to be up between five and seven percent, although they said most of this would already be factored into the market.
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