Evening Coffee by Societe Generale

The Bank of England cut interest rates from 50bps to 25bps also increasing the amount of asset-purchase that will expand the bank’s balance sheet. Governor of the bank, Mark Carney, said that “all elements can be intensified” depending on the needs of the economy. In the US market players are expecting that 180k jobs were created during the month of June, numbers that will be released at 8:30am NY time. A poor figure shall put further pressure on the Dollar Index, while a stronger number might likely attract buying on the greenback with the assumption of an eventual hate hike – as defended by some FED’s officials, like the President of Chicago FED.
    Commodity indices worked higher led by gains of sugar, crude oil, heating oil and cotton.
    Arabica coffee feel in the first hour of the most active trading period, triggering sell stops below 139.05 and extending losses to 136.95 cts where buying interest provided support. A strong Brazilian Real was ignored until the last hour of trading when lack of follow-through selling caught jobbers short and steeply took the board to trade US$ 6.30 cts from the day’s low. The Robusta market went out trading at the middle of the range after it negotiated near the 1800 support level.
     September New York (KCEU6) settled US$ 1.70 cents up. Volume was above average at 61,239 lots including an estimated 1,406 EFP's, 311 EFS's, 627 TAS and 21,174 spreads. 4,077 calls and 2,473 puts also traded. The KCEU6-LRCU6 arbitrage: 57.71cts -1.05cts Ratio: 1.6880-0.0089. €: 1.1128-0.19%. BRL: 3.1948/$+1.37%. CRB: +0.87%. Crude oil: +2.38%. Open interest: 187,203-1,953.
     September London (LRCU6) settled down 10 dollars today. Volume was average at an estimated 13,344 lots including 4,483 spreads, 1,102 EFP's and 4 EFS's. 1,385 calls and 575 puts also traded. Open interest: 106,471+873.
     Indonesia Coffee Exporters and Industries Association sees 2016 coffee output at 10 mln 60kg bags, down from 10.33 mln bags in 2015 due to weather related issues.
     Costa Rica exported 113,074 bags in July, up from 97,214 a year ago and down from 159,655 bags shipped in June2016.
     According to Mr.Lucio Dias, from Cooxupe, arabica-production in Brazil could fall 15% to 20% in 2017/2018 given the biennially cycle of the trees.
     The “C” contract settled at Wednesday’s high after making a new low, almost an outside reversal day. A move above 143.50 tomorrow could spark more buy-stops making the next resistance 145.00. London Sep16 Coffee contract has resistance at 1833 tomorrow, followed by 1842, 1854 and 1866, while support lies at 1804, 1788 and 1765.
    Have a good night and good trades tomorrow,
    Rodrigo Costa