INTL FCStone Daily Coffee Report for August 11/17

Arabica Coffee futures fell on Thursday, with the active December delivery contract falling 4.15 cents at 142.00 cents per pound. Prices were pressured by fundamental, sector, and technical factors. Volume reached 68,755, boosted by 19,422 switches, as the fund roll continues. The active U/Z settled at -355. Prices were initially pressured by the news from the IBGE revising their 2017-18 Brazil crop estimate up 1.5%, pegging total production at 47.2 million bags. Weakness in the Brazilian real against the US dollar prompted origin selling. The Brazilian real weakened to USDBRL3.17 against the US Dollar. System selling was noted along the soft commodity sector, with sugar falling 3%, cocoa 1.75%, and coffee 2.9%. From a technical standpoint, today’s reversal signal must be confirmed by breaking through the 20-day moving average, near today’s lows. A negative close tomorrow will register the first down week in six weeks, since reaching the lows of 115.50 in June 22nd.
 
London followed though from recent negative price action to close around nearby lows as short term buyers withdrew following recent weakness.  The formation of an Evening Star reversal pattern over the course of this week saw many short term technical buyers back away as London held a negative trajectory through much of early trading. A move through yesterday’s low at $2120 basis September accentuated the move with a void of resting commercial support doing little to stem the negative momentum throughout the afternoon. Weakness in the nearby structure furthered the bearish sentiment with the Sep/Nov weakening into level money, the lowest values since early June. The mid-term low of $2069 remains as the short term target lower and technicians will target a settlement below this in order for negative momentum to continue into next week. Decent options volume traded with much of the attention focused around in the Nov17 strikes. The market will monitor the exposure around these strikes as well as further activity through September based strikes which expire on August 16th.