Morgan Stanley Coffee Report

The morning began optimistically enough as spillover cross asset buying courtesy of Fed Chairwoman Yellen’s dovish speech yesterday buoyed markets across the globe.  Coffee gapped higher from yesterday’s close at the 200 day moving average, as the dollar continued its downward momentum, and intraday positive correlation with the firm BRL provided a persuasive directional indicator in hindsight, if an unlikely one.  From 10:30 EST until 11:30 EST the traditional inverse relationship reemerged, arguably pressuring coffee to its lows while maddening traders who had noticed the previous pattern, yet holding the mid Bollinger band and setting an approximate double bottom of 126.15/126.20.  Option interest was widespread, with the K 135 C trading 1300+ times. The N 120 P 782x,  the K 125 P 576x, including a 300 lot chunk at 1.50, the N 115 P 305x, and surging interest in CSO’s, with the KN -200 P and NU -200 P trading 20 and 22 points each, 300 and 400x respectively.  Roaster buying seemed limited to early hours, while Brazil was more active than one would have expected.