All last week the May coffee contract was somewhat quiet based on historical movements such as the Average Trading Range which was less than three cents as compared to nearly five cents at times last year. However, this week is a little different. On Monday the range was over 4 and today the range is well over 3 cents. On Monday the market went up 4.05 cents. Then down 1.35 cents yesterday. Today May is currently down 345 points at 1.1580. I know of no significant news that drove the market up on Monday and drove it down yesterday. Maybe just the switching from March to May contract. What is interesting is that today on the opening May gapped down 55 points and then continued to fall.
Usually the Robusta market follows the Arabica, but last week and this week it appears that the reverse is happening. Except for Monday when the most active month, May, was up 1 cent at 1418, the market was down four out of the last five days. Today London May is down 28 at 1370, the lowest level in over two years.
Arabicas are also at their lowest level in two years. The low of 1.1335 back on January 20th is the lowest for the contract. There is good support below 1.15.
For those of you who are short this is good news, otherwise, well, it is not good news. Today, once again coffee is down significantly. By 4:30 AM December was down 300 points. At 10:15 there was a good rally up 300 points, but it was not sustainable. December slid down the rest of the day to close at 1.2170, down 470 points. The market is now down nearly 2,000 points in four days, or 15+ percent.
Will it rally tomorrow? The stock market dropped big time today, but came back somewhat to close at its lowest low since February 2014.
First, we had strong Dollar and weak Brazilian Real, then a weak Vietnamese currency, and now China. All areas are now being impacted. Even Gold which rallied a little last week fell today.
Today was a big down day. One importer that I talked today characterized the market as “in the Tank”. I guess that is fair. Today, December closed down 600 point at 1.2645. So in the past fourteen days the market has gone up 1300 + points and down an equal amount which is a 10% swing in both directions. Can it make up its mind? Obviously not!!! Fundamentals versus Currency!!
Once again the attached article mentions currency as the reason for the market decline.
But this market does have a tendency to go dramatically in one direction and then, the next day, go in the other direction. Will Monday be an up day?
On Friday the September coffee contract closed nearly unchanged at 1.2840 down 45 points. The contract is now 475 points off its low and has now developed two spinning top candle sticks in a row . The market is looking for direction.
I have attached a rather detailed market report. Although the large amounts of shorts suggest the opportunity for a market rally as the traders cover their shorts, there are other indications that the market will go down.
The market remains below the 40 and 60 day moving averages and the technical tread is still down. There are also some reports that the current crop in Brazil after the drought is bigger than expected, thus putting additional pressure on the market.
July 14, 2015
Today September coffee closed up 255 points at 1.2880.
I am attaching a Dow Jones article about the coffee market. It says, and I agree, that the market looks like it is building a base in the range of 1.25 to 1.30. The financial situation in Greece has some influence on the market as well as the weather in Vietnam and Brazil, and values of the Dollar and the Real, but all of these factors seem to be built into today’s market which is still four to six cents below the 40 and 60 moving averages respectively.
Although the chance of frost in Brazil is still a possibility, although remote, the weather forecast for the next few weeks is for normal temperatures.
For the past 13 trading days September has closed very close to the range of 1.30 to 1.35 with most of the trades in the 1.30 to 1.3250 range. Once again today September tried to go lower through 1.30, but at 12:50 for five minutes someone bought over 1,200 lots and pushed the market up 300 points. Although the settlement for September was at 1.3240 unchanged from yesterday, the last tic was up 190 points.
Although the dollar was up most of yesterday, it closed lower than the previous four sessions. Today the dollar closed up. The attached report from yesterday comments about the influence of the strong dollar.
Today, the September coffee contract was up 240 points at 1.3250. The July contract is in the process of liquidation, so September is now the current month. Today is the sixth day in a row that the contract has traded generally between 1.30 and 1.325. However, today over 1,500 lots were traded in the last ten minutes. This high volume caused September to reach its high for the day and then drop back 100 points.
The attached report is about Vietnam coffee. It claims that the country maybe “swimming” in coffee. The London market was up 1.4% in sympathy with New York. When Vietnam tries to sell this coffee we could see a bit of a sell off in the London Market
After nine out of ten up days with a climb of over 1200 points the July coffee contract finally corrected to close at 132.00, down 445 points. Although July only had a trading range of 100 point in the last ten minutes, the period recorded the highest volume for any other ten minute period during the day. Someone was trying to push down and there was good support. Will the support hold??
This downward activity is all very interesting since according to the attached Reuters report Brazil forecasts a smaller crop next year than this year. Traditionally, the Brazilian government underestimates the crop in order not to encourage selling by over estimating the crop. Also, I have no idea how next year’s crop can be estimated if they have not finished harvesting this year’s crop. But it does appear, at least for yesterday (a down day) and today this report is being ignored.
This year’s crop is less than 50% harvested and at present there is only speculation about its size.
Today was the fourth day in a row that the July coffee contract has closed up. The closing price is 1.3430, up 160 points.
I wanted to share with you the attached technical report which says that the long term and mid-term prospects are bearish, but for the short term we could see some more price increases. The report is worth reading.
Once again we are coming into the period of potential frost in Brazil and traders could be buying a little protection.
As you can see from the attached report industry professionals continue to talk about the effect of the dollar on the desire of coffee producers(growers), especially in Brazil, to sell coffee. Today the dollar softened and the Brazilian Real strengthened and the coffee market went up.
But the other article suggests that next year’s Brazilian crop could be a very big one; therefore, the market could go down. But first we will have to get through the Brazilian winter. If we get through the winter without a frost and there is a good flowering in four months, we could see lower prices.