Morgan Stanley Coffee Report

A notable downdraft emanating from the CRB, BRL and a resurgent dollar was resisted by KC for much of the session as the BCB’s reverse FX swap auctions continue and weak Chinese PMI pressured those currencies.  Crude fell as well as traders prepare for weekly US inventory data tomorrow, which should reflect an 80 year high per Bloomberg reports.  Nonetheless, coffee began the day higher as support was well supplied by both commercial and discretionary traders, and it was not until robusta closed that KC succumbed to the system selling pressure.  With Friday’s COT period closing today, OI has grown around 10k lots while shedding 650 points, seemingly heavy volume for the net move.  First Notice Day in robusta was uneventful as nothing was posted, and limited weakness was present following yesterday’s holiday closure.  Upside option interest was again notable in RC, sustaining a trend that has been in place for over 2 months.  With the funds likely short a manageable amount, it bears watching how motivated the sellers are, and how much value industry finds sub 120.