INTL FCStone Daily Coffee Report for August 16/17

Arabica coffee futures fell Tuesday, with the active December contract losing 4.95 cents or 3.52% at 135.55 cents per pound. The strength of the dollar put pressure on the commodity complex. Volume increased to 60,697 lots. The OI continued to decrease, dropping 2,825 to 195,404 lots on Monday.  Since July 25 the OI has decreased 28,090 lots, initially due to short-covering and recently because of the usual off-setting of contracts ahead of the delivery period. September FND is August 23. The dollar was helped by the fading of the tensions between US and North Korea. The dollar rose 0.5% against major currencies. The Federal Open Market Committee minutes from July 25 meeting are going to be released Wednesday and will give clues on the course ahead for the interest rate hikes. The real remained to hover near USDBRL3.20. Cocoa futures fell 2.9% to $1,865 per ton. GCA inventories increased 118,367 bags during July. 
 
A wave of weakness across the wider commodity complex spilt into London as outright values tracked negative momentum lower. Dollar strength signaled the arrival of short term selling back into the market as prices soon breached the 50 day moving average at $2092 basis Nov17. Commercial buying re-entered the market following a period of relative inactivity, although initially struggled to stem the negative momentum, as a fresh wave of technical selling returned following a move through last week’s low. The nearby structure confirmed the negative sentiment in London; Sep/Nov trading 5100 lots to weaken into $3 premium whilst the Nov/Jan  weakened to $14 premium through 2700 lots. The move lower attracted good volumes of Sep17 based options, on both sides of the market, ahead of tomorrow’s option expiration. Technicians will now look to build on today’s convincing settlement in order to test the psychological $2000 barrier over the coming sessions.