London Market - Follow-through short-covering drove London $17 higher in the morning session but the market was unable to gain traction to the upside with momentum shorts driving the market lower in the afternoon session, following the lead in New York. Despite the market’s negative technical configuration, origin was hesitant to take action and little to no volume was seen from Asia bringing the day’s total volume to under 10,000 lots. The K15/K15 arbitrage further weakened today to + 0.53, the lowest level since December 2013 which could prompt roasters to switch to Arabica in the short-term amid dwindling prospects for New York.
The London COT report was surprising in that Managed money exposure actually increased over the period 17/02 to 24/02 with the net long position increasing by 2,195 lots to 22,127 lots as managed money type activity migrated into London amid high volatility in New York. The merchant net short position decreased by 3,655 lots as a result of roasters fixing into the weakness in London with the 2000 basis K15 eyed as an attractive fixation level. London’s composition looks dangerous at this point and if weakness in New York continues, migratory longs could produce the same volatilities we have seen in New York in the Robusta sphere.