INTL FCStone Daily Coffee Report - Sept 20'17

Arabica Coffee Futures fell sharply on Tuesday. The active contract for December delivery fell 5 cents, settling at 135.35 cents per pound. Volume reached 40,253 lots. The weakness began early, as technical participants took profits after yesterday’s sell signal. Weather reports forecasting rains towards the end of the month in most of Brazil’s coffee areas prompted liquidations. The coffee market rallied significantly over the past two weeks on strong technical performance, weather worries, and a weak dollar. The same factors are lining up to reverse the recent rally. Bearish short-term indicators, and dissuaded weather worries in Brazil have corrected the market to the downside significantly. Tomorrow the US Fed will publish their interest rate decision. Although no change in interest rates is expected, hints of future rate hikes could be enough to give support to the oversold US Dollar.
 
London tracks weakness in New York following easing fundamental concerns out of Brazil, to slip back towards the middle of short term trading ranges.
The fallout in London over the previous couple of weeks has largely neutralised the speculative position in the market and the lack of participation at current levels meant values struggled to match the volatility of the ‘C’ contract. Light commercial buying chipped away following a move through yesterday’s lows, although many believe it will take a move back towards the annual lows to draw significant volume, with good levels of coverage having previously been extended.  Nearby structure defied weakness in the outrights to drive higher throughout; the Nov/Jan strengthening $13 into $25, the highest levels since the beginning of the month. Short term support has emerged around $1963-$1968 and participants will look for a convincing settlement below this if London is to re-test the mid-term target lower at $1914.