Morgan Stanley Coffee Report

With mixed weather recaps and forecasts prevailing, coffee suffered an inside day with a relatively narrow range.  Pressure again emerged shortly before the traditional NY opening, with KCU falling 100 points sharply to the day’s low (135.45) before recovering.  An overwhelmingly negative macro sentiment weighed on coffee throughout the day, keeping the market in negative territory for the entirety of the session.  With no action expected from tomorrow’s FOMC decision, and all eyes focused on the coming referendum in the UK, the dollar renewed its push higher while commodity based currencies in particular slumped.   The “safe haven” trade at the moment appears to be benefitting the CHF, JPY, DXY and Gold, while risk appetite has plunged as the likelihood of a Brexit appears to increase, none of which is friendly coffee.  Meanwhile, with Robusta bulls prevalent amongst the forward looking commercial contingent, the performance can only be categorized as disappointing.  Another month of robust exports out of Vietnam was reported by the customs department, though this is what qualifies as old news, coming 15 days after other official agencies and being well priced in.  For all the excitement of the past week, it is worth noting that KC2 is back inside the 23.6% retracement from the 2014 highs, as well as the 5 year range going back to the 2011 peak.  On a weekly chart things appear more interesting as the trend channel has been thoroughly eclipsed after multiple prior attempts.  With boredom having been the key sentiment for months prior to last week’s breakout, it appears that most traders are hoping the current trading is little more than consolidation in a new trading paradigm.