INTL FCStone Daily Coffee Report for Sept 15/17

Arabica coffee futures settled lower for the first time in six sessions, after rallying over 12 cents. The active contract for December delivery settled 20 points lower at 137.65 cents per pound. Volume reached 27,468 lots. Dry weather in Brazil continues to push prices higher, reaching 139.25 cents per pound for the December contract. From a technical standpoint, today’s new high and negative close, and plateauing oscillators in overbought territory might prompt some technical profit taking. Resistance remains in the 140.00 area and support in the 133.00 area. In macro news, US inflation beat expectations, yet the dollar weakened against major currencies. The BOE left their interest policy unchanged. Dollar index fell 0.39%, the British Pound strengthened 1.41% against the dollar to GBPUSD1.3395, and the Brazilian real strengthened 0.57% to USDBRL 3.117. Crude oil prices increased 0.64% to $49.66 per barrel.
 
The volatility of recent weeks seems to have subsided for the time being as outright values look to establish a short term range following the aggressive move lower. A widening arbitrage maintained a lid to London’s upside potential with the Dec/Nov trading through 48 cents, a movement of over 6 cents wider throughout the course of the week. Commercial support has backed away for now, with many looking for a test of the annual lows at $1892 to re-engage, with the industry having extended good levels of coverage throughout the move lower. Open interest changes have stalled over the course of the week with much of the volume attributed to intra-day traders;  a failure to break through yesterday’s lows at $1968 saw shorts scramble for cover during the latter part of the session as London went out broadly unchanged.
The September delivery month yielded its first tenders for the week with the 56 lots stopped taking monthly totals to 329 tenders and 4 re-tenders. A further 1359 lots of positions remain open in the front month.