ICE Coffee Futures Plunge Lower
Arabica coffee prices moved sharply lower today motivated by speculative selling that
triggered large stop orders, a weakening of the Brazilian Real that prompted
exporter selling, and an overall deterioration of the technical picture. The
active contract for July delivery fell 5.55 cents to settle at 137.55 per
pound. Circuit breakers at the ICE were triggered for “C” futures as a
cascading stop situation pushed prices rapidly lower. A cascading stop is
characterized by the accumulation of stop orders that trigger other stop
orders, which hit yet more stop orders and so on; a condition that creates a
lack of liquidity and a price vacuum. Origin selling was also noted as weather
in Brazil coffee regions remains optimum while the harvesting period looms and
the Real weakened against the Dollar. Technically, near term support is seen
at the April 15th 133.55 low basis July.
London: Robusta recorded an active
opening sequence with the board uncovering a batch of sell stops below 2060 in
July which produced good opening volume. The action appeared to take the market
unawares with buying building into the market after the initial move lower.
Turnover was good with the action reflected in the May discount widening back
towards $30 before the market reverted to a tight operating range into the
balance of the morning. Prices came under increasing pressure into the second
part of the session as the board rolled over into another wave of selling which
followed weakness taking the board below a second trigger of 2050 looking
towards the 2000 marker. Flat price selling intensified with the weakness
taking out resting price fix buying. Prices found it difficult to find a level
working around the 2020 pivot level having turned all the main indicators lower
with today’s performance. The question from today will be to what degree we
have released “Managed Money” longs after such a performance. The working
number as of the last COT report at 17,033 was considered higher than expected.
The board was not in a position to recover the lost ground edging nearer to the
2000 bench mark into the closing sequence of the day totally turning indicators
and pulling in intraday shorts.