Today the September coffee contract closed down 90 points at 1.2505. Although not much, the contract has now closed down six days in a row. Today’s low is less than 100 higher than the all time contract low from July 7 of 1.2365. Open Brazilian Report.
September tried to go higher after touching the low, but the push could not be sustained. We are now threatening to break through the low. If that occurs, there could be many sell stops that could increase the rate of decent. To where?? Anybody’s guess!
With a continued strong dollar and weak Brazilian Real and a good current harvest, prices could be under pressure to continue the decent. As always the market could correct itself upwards tomorrow and then begin the decent again.
Today, September dropped another 225 points to close at 1.2515. This drop means that September has gone down five out of six of the last trading days and the close is the lowest since December 2013. Included in this decline was the largest drop since May 21.
I have attached a coffee report, although it is dated July 1, it does explain some of the reasons for the decline. I have also been hearing that there are/were a lot of sell stops between 1.30 and 1.25 which have accentuated the decline.
Back in Nov/Dec 2013 there was September bottomed in this area. Therefore we could see some good support in the 1.25 area.
If we break through 1.25, we could see further significant declines; however, maybe not until the threat of frost in Brazil is past. The forecast is for normal to above normal temperatures in southern Brazil for the next 8-14 days.
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.
Last Thursday I said that the coffee market had corrected rather dramatically downward. Since then after three days of trading, May is down another 400 points. May closed today at 124.50, down only 45 points for the day with a trading range of 300 points. Technicians call today’s candlestick a spinning top because of the long tails up and down with a very limited change from yesterday.
Two weeks ago the dollar had weakened which may have cause the May contract to go up over 142.50. Now the dollar is strengthening which may be one reason May is showing weakness.
Although May has come down a lot, as long as the dollar continues to strengthen against the Brazilian Real, I think that the market has limited upside movement unless of course the weather forecast for Brazil is for temperatures to be single digit Celsius