ICE Coffee Futures Lower on Technical Weakness
Arabica coffee futures traded in a narrow range today, failing to test much higher or lower in a day marked by low volume and diminished volatility. The active contract for March delivery ended 115 points lower today after oscillating between 115.90 and 113.85 to settle at 114.15 cents a pound. The lack of origin selling continues to be a factor in market performance, leaving day-to-day action up to speculative operators who liquidated longs placed last week. Yesterday’s brief recovery was further short-covering as evidenced by a drop in total open interest. In financial news, the Federal Reserve held its last policy-making meeting for the year today with results to be announced tomorrow. Today’s performance does nothing to change the current configuration of the market, which will have to test 116.35 for resistance and 111.85 for support in the March contract. London: Robusta was working to find a level into the session as prices continued to roll over. The implication of options has become important into the weakness as it was when the market rallied. The delta positions which accumulated on the upside needs to be released which added to the spot month pressure over the last few days reflecting in the performance of the option premium. The COT numbers for Robusta showed a significant reduction in the net short which been an important feature to the change in configuration that the London market has reflected over the last few sessions. The origin picture is not showing any significant change but with the approaching Christmas holidays and the “Tet” celebrations coming ever nearer at the end of January the pressure to realise income against financing will be an interesting scenario to monitor. Changes in the open position reflect the ongoing pattern of liquidation with the exposure down another 2,672 lots after the weakness yesterday which could be associated with the options. Prices continued to work lower as Levels approached the lower option strike of 1700 which could present an interesting scenario for tomorrow. Momentum has broken with the board turning lower but the market continues to operate with seriously low certified stocks.
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ICE Coffee Futures Rally
Arabica coffee futures recovered Tuesday helped by the London market action. The most active contract for March delivery settled 415 points higher at 110.25 cents a pound. A strong move of the London Robusta market encouraged the arbitrage related buying, after the Arabica premium traded at the narrowest level of the last five years. The coffee market was also helped by other commodity markets that advanced today supported by a weak US dollar. The US dollar weakened as investors expect no change of the monetary policy in the short term. The CRB index gained 175 points, posting highs not seen since October 30. In related news, the real in Brazil was stronger as traders anticipate the central bank will continue to intervene to support the currency. Technically, the March chart shows support and resistance in the near term at 105.50 and 112.00 respectively. A recent increment of the open interest reflecting new short players could induce some short covering today. The OI increased 3,496 lots since December 5. London: A more controlled opening for Robusta today with the activity revolving around structure. The market is continually referring to ongoing issues of low stocks and no grading. Options will be a main focus over the coming days with the January positions expiring next Wednesday 18th December. We are currently carrying almost 12,000 Calls live at the moment with the market moving above the biggest strike of 1800 during the morning which alone holds 5,589 lots open which provided another push to momentum. The pattern of trading repeated a familiar sequence with the board pausing before taking another leg higher encouraged by the backwardation of the market. The quality of selling became more diluted as the price action worked higher. Turnover maintained a good pace into the session with the market constantly searching for the next target on the upside. The January premium traded to a new high with the outright market finding its level above 1800. Prices continued its impressive rally into the afternoon with only a small reduction in the January exposure after the healthy upside move yesterday encouraging the rally. The pattern of trading indicated that we were experiencing a transition of shorts into longs driving the move as turnover broke 30,000 lots and the price action positioned around the highs into the close. Options added a lot of liquidity as strikes were rolled and traders organized positions for the January expiry against the aggressive rally in prices. |
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