Arabica coffee futures recovered ground Thursday, after an early selling failed to attract large participation, prompting short covering. The most active contract for September delivery settled 150 points higher at 160.80 a pound. Constructive macro and fundamental factors continued to support the prices. Dry weather has affected the Brazil’s 2021 /2022 Arabica crop, and recently has raised concerns over the right development of the 2022 / 2023. Despite that the average of precipitations is very low for June, so far total accumulations are almost nil for the main producing areas. Latin American currencies reversed early gains ending lower. Participants will focus on reports of Brazil and the surge of the demand after the summer. Technically, the trend remains bullish. A large triangle formation on the September chart suggests a continuation pattern. Support and resistance are at 156 and 169 respectively. The RSI oscillator with neutral values (50.3%) , while the SSK is close to give a buy signal. A quiet day in the Robusta market today with a narrow range of 23 USD/ton, a close price of 1611 (+3) basis Sep21 and mostly unchanged spreads. Just like in the previous day, the market found support in the 1597- 1600 region indicating that the price decline seen earlier this week may have been just a correction and that the bullish trend continues. Technical indicators have left the overbought region are currently in neutral territory.
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Arabica fell for a third consecutive day, settling 159.30, -.55, while London declined $14 to 1582. While the price action was negative, silver linings for the bulls were notable; Friday’s low held, as did trendline support off the early April lows, prices rallied back into settlement, a final print of 160.10 gives a launching pad for tomorrow morning’s trading, and another relatively low volume outright trading environment did little to suggest grudged trading of any magnitude. Nonetheless a down day is a down day, and a 3rd day of inability to break 5.00 by the BRL was a noted cause of concern given the December reversal off similar levels. Trader sentiment is notably sagging. Day 3 of the index roll saw slight settlement improvement in structure as the past 2 day’s heavy turnover took a step back, N/U gaining 5 points to close -2.10, albeit in an equal -2.15 / -2.05 range to yesterday, and with a lower VWAP by the slimmest of margins, -2.11 from -2.10. Tomorrow’s CPI numbers have been a point of focus from coffee traders on the chats, with Bloomberg reporting a consensus estimated for May of +0.4% MoM (0.8% prior) and 4.7% YoY (4.2% prior). That data is set for release 8:30am NY time tomorrow. Friday’s July option expiration is also a potentially pivotal event given the heavy positioning everywhere and cheap expiring protection for those positions.
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