September 14th, 2017

Arabica Coffee Futures extended gains on Wednesday, with the active contract for December delivery settling 280 points higher, or 2.02%, at 137.85 cents per pound. Active buying began at the open, constantly reaching new highs throughout the session. Prices have recovered over 10 cents since the recent low on September 6th, 126.75. However, open interest is nearly unchanged from Sep 6, 206,646 lots vs 205,989 at today’s opening, suggesting an offset between new and established positions. Volume reached 35,478 lots including 4540 switches. Dry weather in Brazil, strong technical performance, and a bullish sentiment in the commodity complex continue to add fuel to the rally in coffee futures. Crude oil gained 2%, reaching $50 per barrel in the December contract. From a technical standpoint, breakage of the 50% Fibonacci retracement now sets up the 140-psychological resistance level as the next objective for the December coffee contact; support remains in the untested 133 area. Divergence between coffee prices and the Brazilian real continues, while the USDBRL weakens 0.3% to 3.1334.
 
An encouraging performance in London sees values bounce away from recent lows, defying afternoon Dollar strength to re-test the physiological $2000 barrier. Last night’s encouraging settlement in New York resulted in a more positive tone at  the London opening with values largely holding an upward trajectory thereafter. A move through nearby resistance at $1986 attracted technical buying into Robusta, although only a move back to the option strike at $2000 attracted scatterings of Asian selling.  A lack of sustained origin pressure has accentuated this impulsive move away from the lows at $1914, although technicians will look for a settlement above $2030 to confirm this move as more than corrective action.  Nearby structure attracted reasonable turnover with the Nov/Jan weakening into $12 premium despite the flat price strength. The Jan/March strengthened $3 into $6 premium with the Nov/Jan/March fly narrowing $6 having settled at $12