Last Friday the July coffee contract broke through resistance at 1.30 and zipped up 350 points to close at 1.3360. Yesterday July tried to go higher and hit 1.3530 before closing down 90 points at 1.3270. Today July gapped down 70 points on the opening and continued down to close at 1.3010, down 255 for the day.
Technicians look at points of resistance as points of support if the market breaks through the resistance and turns south. For three days last week July tried to push through 1.30. On Friday it was successful. Today, as July was coming down it tried to break through 1.30, but could not close below it.
It will be interesting to see if support holds. If it does not hold, July could retrace it path to the 1.19/1.20 range where it will run into support
Good Morning Folks
Of the past seven days we have had four strong up days when the market was up over 1000 points. Yesterday was a spinning top day with market closing very close to the opening with a 30 point change. But yesterday it tried to go down and met support at 1.2775. This morning at the opening the July coffee contract gapped down 120 points, but has recovered and is now trading at 1.2925, down 80 points.
Both the Brazilian Real and the Dollar have recovered a little from their recent lows, so it appears that the currency influence has stabilized a bit.
Technically, if we break through resistance at 1.30/1.32, we could see a higher market. The attached article discusses this situation a little further.
Since April 20, 2016, we have seen six down days and one up day. On Friday July closed at 1.2150, down 55 points.
Since January 21 the Brazilian Real has strengthened drifting upward and is now at the same level as last July.
Also, since mid-January the Dollar as weakened drifting downward.
Last Friday the gap between the two currencies was about equal to the gap last summer.
Although world stocks are low, the fact that Brazil expects to harvest a pretty big crop this year seems to be the over-riding thought which is sending the market down and the market is only about $0.10 less than where it was in late August 2015.
Twice today, once on the opening and then again at 10:15 the July coffee contract tried to move over 1.24 and fell back. Yesterday when the Dollar and the Real traded down and up respectively and the impeachment proceedings in Brazil were thought to help the economy, the coffee market turned bearish and continued down slightly today. The attached article from yesterday explains the situation further.
Today July closed down 75 points at 1.2335.
With winter approaching in Brazil and world stocks at a low level, the market still has a bullish side.
Today was a day of correction. After rising seven out of the past nine days and after gapping up on the opening this morning and continuing to go up 200 points, at 9:15 the market said enough is enough and dropped 500 points in a half hour. With a short pause at 11:00 the market continued to drop on pretty good volume. The July contract closed down 460 points at 1.2410.
The Dollar has retracted from its high. It is now about where it was in August of last year. The Brazilian Real has moved off of its lows and it is also in the same area that it was last August. The July coffee contract is about five cents lower than where it was in August of last year.
So based on currency trading without consideration of weather or Brazilian politics in the 1.25 to 1.30 range.
However, and in spite of the down market today, the attached Dow Jones report, which was issued before the market dropped today, is rather bullish.
For the past two weeks May coffee has closed within a very tight range (1.1980 to 1.2460) while crossing the 40 and 60 day moving averages several times.
Today May closed the week at 1.2295 , down 20 points.
The question is whether the March rally that went as high as 1.35 indicates a change in the downward direction that the market has been experiencing over the past 18 months or is it just a pause before it tries again to break through support around 1.15. The Real has recovered from its lows and the Dollar has lost some of its strength. A weak Real and a strong Dollar have contributed somewhat to lower prices. Therefore the reverse of this trend is bullish.
Also, as we approach the Brazilian winter and the chance of frost in Brazil, the market may not desire to test the recent lows.
So whoever bought at 1.20 or below probably made a good decision
This morning May coffee is trading at 1.2110, down 170 points, at its low for the day and the lowest in past four weeks. During this time the market has climbed as high as 1.3640. Today it is crossing the 40 and 60 day moving averages which have nearly flat lined this year.
The Market movement to the mid-1.30s may have been an over reach. Since last September the Dollar has strengthened and weakened and the Brazilian Real has done just the opposite. Today they are trading in the same range as last September and so is the coffee market.
On the Robusta front, last week, traders reduced their short positions to the lowest point in four months.
It looks the market is building a base in the 1.2250 + or – 1,000 points.
Happy Saint Patrick’s Day to everyone, especially my Irish friends!
Today the May coffee contract is at the highest high since October 2015. The market has been as high as 1.3490 and is currently trading at 1.3400 up 500 points. Since March 2 during 10 out the past trading 12 days the market has been up and gained 1925 points in that period.
Once again the value of the Dollar and the Real is influencing the market. This month the Dollar has dropped dramatically. Today it is experiencing one of the largest drops this year. On the other hand the Real this month is at the highest level since September. Brazilian politics is partially influencing this move.
I have attached two articles. One talks about Brazilian politics and the possible impeachment of the President. The second article talks about the price spread between “Gourmet” and mass-market coffees.
I hope that everyone is having a good weekend.
On Friday the May coffee contract rose 230 points to close at 1.2105, the highest close since February 5 and above the 40 and 60 day moving averages. Typical with commodities and especially with coffee just when you think that there is a trend in one direction the market aggressively turns the other way.
During the past week the Bovespa, a stock exchange in Sao Paulo, Brazil, rose 17.5%. On Thursday and Friday the Real was up strongly and Dollar was down. These actions discourage sellers.
The corruption scandals in Brazil have been weighing heavily on the commodity and stock markets. Last week authorities seem to be clamping down and the investigation is widening, maybe to the President and former President. See the attached article from Dow Jones.
Good Morning Folks
Yesterday was the first up day in seven trading sessions. May coffee was up 80 points at 1.1555. Today May has opened strongly up at 1.1785, up 230 points. Although these two up days are not unusual after six down days, it is noteworthy because the attached technical article indicates that the market is still bearish.
During the last three days we have seen the market challenge 1.15 and 1.14 only to meet heavy resistance just like on January 20 and 21. Since January 20 the market has hit 1.1340 twice which resulted in the market moving up the next day.
May will probably challenge the lows again, but will we get to $1.00??