Morgan Stanley Coffee Report

Commodities in general suffered a rough start to the week as the tailwind courtesy of a dovish rate environment which resulted in a weaker dollar and firmer commodity prices ran into resistance on the back of hawkish comments from a typically dovish central banker. Boston Fed President Eric Rosengren said it was “surprising” that futures markets were pricing in only one or zero rate hikes this years, a prediction which he believes could prove “too pessimistic”.  Commodity prices came under pressure with the softs complex bearing the brunt of the damage. Coffee started off the week already handicapped by Friday’s COT report which showed that funds, after adding longs at a record pace, only liquidated 455 lots despite the market falling 7 cents over the reporting week.   The market gapped 145 points lower on the opening and held in standby mode until U.S. markets became active and commodity prices started to falter. Coffee followed suite taking another leg lower to hold just above Friday’s 12440 low, but once violated there was no looking back.   The low for the day was made on the close and perhaps a silver lining can be found in holding the 100 day May average of 122.20, and the 200 day moving average of 124.35 basis KC2, but trading the low on the close suggests more a case of being saved by the bell than holding “support”.