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Coffee Market Analysis

May coffee has seen some volatile price action during the past few weeks, but it has been unable to sustain any strong recovery from a longer-term downtrend. While several key global coffee producers have seen production shortfalls this season, the prospect of a huge Brazilian coffee crop later in the year continues to weigh on prices. Forecasts for dry weather over Brazilian production areas may provide some strength to the market, but unless those conditions continue for an extended period of time, the upcoming crop will likely be well above the 50 million-bag level. Slumping global equity markets in the wake of last Friday’s lukewarm US jobs data are likely to put additional pressure on coffee prices this morning. ICE exchange coffee stocks were unchanged at 1.537 million bas as of April 6th, with 15,472 pending review. The most recent Commitment of Traders report showed that non-commercial traders still held onto a fairly large net-short coffee position as of last Tuesday, despite the recent price volatility.
Slumping global equity markets and lukewarm macroeconomic sentiment are likely to weight on coffee prices this morning and keep the market from retesting last week’s highs. While quiet trading conditions in Europe and a large fund net-short position could set the stage for a short-covering rebound, bearish global supply/demand outlook should keep coffee prices well within their longer-term downtrend.

Technical Analysis

COFFEE (MAY): The moving average crossover up (9 above 18) indicates a possible developing short-term uptrend. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The market’s short-term trend is positive on the close above the 9-day moving average. It is a slightly negative indicator that the close was lower than the pivot swing number. The near-term upside objective is at 187.03. The next area of resistance is around 185.02 and 187.03, while 1st support hits today at 180.98 and below there at 178.94.

 

StockMarketNews Research Team

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