Green Coffee Update-February 04, 2016

February 5, 2016

Good Morning folks

For the last few weeks the coffee market has been relatively quiet while trading in a narrow range between 1.12 and 1.19.  However, this week the market has gone up each over 600 points.  It is currently trading at 1.2315, up 160 points and trading above an upper down sloping technical line and the 40 and 60 day moving averages, all which are bullish signs.

But, and there always is a BUT, one of the attached reports is bearish.  It says that Brazil’s 16/17 could be a record.  The other report indicates that this week is a holiday week in Vietnam and Brazil, Tet and Carnival respectively.  Therefore volume is light this week as traders cover shorts and roll from March to May before first notice day.

 

Here are some comments about yesterday’s market:

 

HC’15 opened today @ 121.40  (+0.15)

 

HC’15 Current low:          121.35  (Support 111.00)

HC’15 Current high:         123.00  (Resistance 127.00)

 

A commodity friendly day included coffee in the performance, opening with a modicum of buying that would keep the market in an extremely tight band for most of the early hours.  A generalized 15 minute selloff that coincided with similar action in cocoa and to a lesser extent sugar took the market to its low around 8am EST, but ultimately proved to be a short term buying opportunity. Volume overall was notable as the roll remains on target ahead of FND on the 19th.  Weather has been trending in conversation, something that is likely to gain momentum following the FNC’s late day estimate of 1mio bags lost due to drought.  Certified stocks drew 13k bags, taking the outright number to 1.59mio, continuing a trend that has caught the attention of the discretionary traders in the market.  Spreads continue to tighten, with KC H/K reaching a peak of -1.85 intraday.  The BRL rallied back inside 4.00 as January inflows reached 1.5bln per a Brazilian Central Bank report this morning, while embattled Senator Eduardo Cunha stated that formal independence is likely to be granted to the BCB. Meanwhile the BCB reportedly is seeking a 4.5% inflation rate before reducing interest rates, while warning of the potential for increased rates should inflation rise.  A suddenly interesting environment has the makings of a two sided trade, however more work needs to be done before the cautiously friendly react in more than a tepid manner.