INTL FCStone Daily Coffee Report for August 15/17

Arabica Coffee Futures fell sharply on Monday, following through last week’s weakness and breaking through last week’s lows. The active contract for December delivery settled 335 points lower, at 140,50 cents per pound, while the benchmark contract for September delivery settled 5 points below the 137 mark. Volume was once again boosted by switch volume, reaching over 57K lots traded. The U/Z switch traded in a 10-point range, -350 to -360, settling mid-way, as first notice day for the September approaches on Aug 23. The commodity sector was once again under pressure of macroeconomic news, as weak Chinese economic figures disappointed, pointing towards slowing aggregate demand. In coffee news, US GCA stocks will be published tomorrow for the month of July. July 2016 stocks increased 96,000 bags, below the five-year average of a 290,000 bags increment. From a technical standpoint, an overbought divergence in the weekly RSI could point towards further weakness.
 
With U.S Commitment of Traders reports showing a further significant reduction in the net fund short position, a feeling of bearish sentiment greeted that start of the new week with many short-term buyers backing away.  With limited commercial activity on both sides of the market, much of the morning saw stagnant flat price action as participants awaited the entrance of the U.S. Afternoon weakness in the ‘C’ contract pushed London lower amid a continued void of resting buy orders. Support emerged around the option strike at $2100 ahead of the Wednesday’s September option expiration, with values holding around the 50 day moving average at $2106 thereafter. The recent range remains intact, for now, as technicians look for a convincing close around the nearby lows at $2069.
This week’s London COT report, based on the disaggregated futures and options sector, showed a 2,329 lot increase in the managed money net long position which now reads 25,120 lots long. This is the largest the managed money let long has been since 25 April.