Morgan Stanley Coffee Report

Consolidation around the 120 level continues in coffee, as KC continues to dance to its own tune, shaking off a negative commodity complex and strong dollar.  Downside momentum seems to have stalled with little fundamental impetus for fresh selling and a comfortable long term range in place.  Nonetheless, to gather upside will take some effort as KC2 currently finds itself below the mid Bollinger band, all Fibonacci levels from the April 2015 high, and the 26, 50, 100 and 200 day moving averages.  Switching to a KCN chart does nothing to improve the picture.  Intrigue can again be found in Robusta however, as the NU spread traded from -17 all the way to -5 at the peak before settling at -9 (-10 last print).  Given the weather focus, consumption trajectory, reportedly firm diffs, supply limitations in Brazil and Indonesia, and slowing shipments from Vietnam according to April data, coupled with the heavy recent upside option activity perhaps it was only a matter of time before the spreads became bid.  A note of caution could be the current quiet May delivery period, with the moderate shuffling of conilon amongst seemingly many hands not an enthusiastic indicator of demand for the certs come July.  The BCB minutes from last week’s meeting were released, reporting a unanimous agreement to hold the Selic rate in place with an eye to the still-strong inflation data.  Tomorrow could be an eventful close to the week, as US Nonfarm payrolls are released and traders pre-position ahead of another keenly watched COT report.