Evening Coffee by Societe Generale

    The FOMC has acknowledged that risks have diminished for the US economy and mentioned a tight labor market on the statement of its two-day meeting. Initial reaction of the markets implied a hawkish view until a more careful reading of the officials’ assessment apparently has drawn the perception that a hike will likely only happen by December. After the announcement the S&P500 tried to rally towards the day’s high just to slide to unchanged levels at the end of the day. The Dollar Index reversed its early strength losing the positive momentum and settling with a key reversal chart pattern. The three major commodity indices had a negative performance led mostly by energy raw materials, which fell after inventories of crude and gasoline rose a lot more than expected (in fact for Oil the forecasts were for a drawdown of inventories).
     Coffee in both NY and London traded very poor volumes working at negative territory during a great portion of the most active period (after 8am in NY). Arabica prices were able to hold at the 139.90 support level, closing near unchanged while Robusta quietly closed one dollar from the low.
     September New York (KCEU6) settled US$ 0.40 cents down. Volume was below average at 19,580 lots including an estimated 770 EFP's, 2 EFS's, 1,068 TAS and 4,719 spreads. 3,407 calls and 2,270 puts also traded. The KCEU6-LRCU6 arbitrage: 58.22cts -0.88cts Ratio: 1.7115-0.0080. €: 1.1059+0.66%. BRL: 3.2634/$+0.39%. CRB: -0.88%. Crude oil: -2.33%. Open interest: 184,613-48.
     September London (LRCU6) settled down 7 dollars today. Volume was below average at an estimated 7,654 lots including 2,154 spreads, 322 EFP's and no EFS's. 1260 calls and 1,097 puts also traded. Open interest: 104,717-1,205.
     According to the General Statistics Office of Vietnam 2,17 mln bags were exported in June, 17% higher than a year ago, accumulating shipments during the current crop year to 24.17 mln, or 30.6% more than the same period of the last season.
     El Salvador in June exported 47.766 bags of coffee, comparing to last year’s 61,262 bags. On the 15/16 crop year exports are down already 33.5%, or 358,519 bags, comparing to 2014/2015.
     Brazil government will conduct bi-weekly auction of half of its total stocks, or 693 thousand bags of coffee, to help ease the domestic demand that has kept internal prices of lower grade beans historically very close to commercial qualities.
    Support for Arabica September16 contract is at 140.30 tomorrow, followed by the recent low of 139.05. Resistance levels are at 143.50 and 144.30.
    Have a good night and good trades tomorrow,
    Rodrigo Costa