INTL FCStone Daily Coffee Report

Arabica Coffee futures extended Friday’s positive action, reaching 120 points higher with the active contract for July delivery settling at 136.90 cents per pound, the 20-day moving average. The technical indicator has provided resistance over the past four sessions, and breakage to the upside could prompt further speculative buying. Coffee followed a similar pattern as that of Friday’s trading within positive and negative territory throughout the session, and rallying towards the close. Activity was dominated by switch volume, reaching 5597 lots, while total volume reached 26,713 lots. Macroeconomic news added some volatility to the Brazilian real, with the Euro weakening after the French presidential election results, and the dollar gaining ground. Friday’s COT report showed the commercial sector covering 3,592 net shorts to a net 25,121 short position. The managed money increased their short position by a net 4,710 lots, to 10,387 net shorts.
Flat price continues to hold within recent short term parameters, with much of the volume derived through nearby structure. Values operated in positive territory throughout, aided by a void of selling in the market as origin maintained its recent absence. Participants will look for a break above the recent high at $2039 basis July if the market is to move higher whilst $1974 remains a target for short term Bears.Much of the traded volume was through the July/Sep spread, which weakened to $18 discount through 2800 lots and further into the hands of the commercial short. September based options activity continued apace, largely through a three way strategy: selling 800 Sep 2100 calls, buying 1600 Sep 2300 calls and buying 800 2450 calls. The market will closely observe open interest surrounding these strikes through the coming sessions.This week’s COT data, based on the disaggregated futures and options sector showed the managed money net long position reduced by a further 4047 lots, to 24,264 lots long. The bulk of this move was absorbed by the merchants, which reduced the net short position by 5169 lots to 14,841 lots short. This was primarily a result of 4574 lots of short covering.