Green Coffee Update-July 11, 2016

July 11, 2016

Good Morning

September coffee opened up 200 points.  Then at 8:35 September jumped another 100 points.  Currently it is trading at 1.4895 up 485 points.

The weather in Brazil is favorable for the harvest and no cold weather is in the forecast.  Both the Dollar and the Real are reasonably flat.

Here is a report from Morgan Stanley from Friday.

 

Early buying was met with disinterest as Americas based traders strolled into their offices with little volume to greet them.  The low of 141.60 traded during the opening minute, and the rest of the day would effectively feature a 200 point range.  A mid-day high of 144.30 would prove to be an anomaly for much of the session as prices seemed magnetically drawn to the 143.50-143.85 area for 2 hours as participation waned.  However, end of day buying emerged posting a marginal new high for the day during settlement, ending an inside day on a particularly positive note.  Early focus was on the US Non-Farm Payrolls number, with overnight optimism pervading other markets as expectations for a positive monthly performance reigned.  Ultimately, a better than hoped for +287k number would provide a short term boost to both  the DXY, and more perplexingly for many, the BRL.  With a positive reaction to Brazil’s 2017 fiscal deficit target, the BCB halting Fx reverse swap auctions today in an effort to reduce their inventory of such swaps, and positive indications of US consumer health adding to sentiment for some EM currencies in the absence of expectations of a Fed rate hike, the BRL was able to stem 5 previous sessions of weakening.  In trying to gauge the most important of factors, it is worth noting the previous 5 sessions had also been concurrent with BCB auctions, which had injected a reported US$500m a day in USD demand while pressuring the local BRL. The COT Net-Non Commercial stands at 32792, within expectations, and remains shy of the October 2014 highs.

 

BCB is Brazilian Coffee Board

 

It looks like Fx reverse swap auctions are causing the bullishness!!!