Coffee Commentary for August 1st

ICE Coffee Futures Whipsaw following morning Rally

 

Arabica coffee futures displayed high volatility throughout today’s session.  The most active contract for September delivery closed 270 points lower at 192, after trading at an early high of 207.40, at which point the market was 1200 points higher.  Volume increased to 47,886 lots, including 13,410 switches.  Renewed concerns regarding the 2015 Brazilian crop and the technical picture caused a sharp rally during early hour however a general bearish sentiment affecting equities and commodity markets encouraged speculators to liquidate and take profits towards the end of the day.

According to the commitment of trader’s report, as of Tuesday 29th, net long exposure had increased by 4,170 lots to 38,845 lots.   During the week, Arabica prices gained 6.8% or 1225 points.  Bullish reports encouraged speculative buying. The up move was fueled by short term spec buying after the breaking of an important area of resistance at 182-185 basis the September contract. 

 

London - Another active opening with the market attempting build upon the rally of yesterday as the board registered a new high on the move. The action took levels back into the higher zone achieved during March/May this year. Technical considerations have provided an important influence to the rally after the market open upside gaps over the last two weeks. The change in momentum forced a combination of short covering and attracted new longs as prices rallied on the back of the aggressive move in New York. Origin have provided scale selling together with a certain degree of rolling which has been easily absorbed by the spec involvement. The month change over yesterday has been important with the focus of new interest still directed at the September which carries the main open position. The policy of building new positions in the most liquid month then rolling exposure could be interesting as we move into the new trading month.

Shipment ideas from Vietnam suggest 85,000 tonnes but recent comments indicate this number could be towards 130,000 after a surge in movement covering the last few days of July. Prices have moved above over 4,700 calls open at 2100 in September which will add to the volatility into the coming days. Exposure after yesterday’s sharp rally was down albeit by just 208 lots so a battle between liquidation and new positions suggested.

Settlement below 2100 important tonight – weakness Monday!