Arabica coffee futures May 23 contract ended the week 120 points lower in comparison to last week on Friday and 345 points lower on today’s session with a settlement at 176.60 cents a pound. The NY market found resistance at the 20-day moving average; no additional momentum was found to trade above the 182 area. The weakness in the Brazilian real put pressure on Arabica, keeping the price range intact. One more time, the market felt comfortable trading in the 175/176 area for most of the session. No clear direction in the last two weeks trading both sides of the range, with a notable decrease in volume this week, the lowest volume of the year so far on Tuesday, 23,484 lots traded, including 5,523 switches, and today a total of 27,485 lots, including 5,580 switches. The May 23/July 23 switch had a range of +0.80/+1.45 today with a settle of +1.25. Certified stocks decrease by 1,540 bags to 787,375 bags, while pending grading stocks increase by 660 bags to 1,135 bags. No grading today. No COT today.
The early test and failure of the previous day’s high in London set the tone for the remainder of the session, which dropped over 1.5% as values tracked the macro lower, led by crude oil. This has seen levels return to an area of congestion around $2060 basis May23, with commercial interest within the current $2060 to $2150 weekly range grinding to a halt. The lack of commercial flow has confined the Robusta terminal to acting merely as an arbitrage tool, with participants observing a large short being established over the last two weeks (short Arabica, long London), and some anticipating the Robusta long to be used to stop coffee on the exchange against May 23 expiry.
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Arabica coffee futures kick off the session attempting to close the gap left on the previous session at 174.95 and 175.10. Once it managed to build the momentum in the first three hours above 176, the small specs that added new shorts last minute yesterday opted to get out, adding to the fuel from the GCA report, which many could have taken as bullish. The European Central Bank hiked its benchmark interest rate by 50 basis points as promised this morning while giving no signals about future moves. China continues to expand its influence in the world after brokering a peace initiative between Iran and Saudi Arabia. It is now taking aim at brokering a peace deal between Russia and Ukraine. Certified stocks increase by 3,338 bags to 788,915 bags, while pending grading decreases by 9,683 bags to 475 bags. Grading today: 9,683 bags. Passed 4,653 bags. Failed 4,780.
Despite news of the Swiss National Bank stepping in to provide support for Credit Suisse, the Robusta terminal was slow to respond to the nearby macro positivity. Values opening only marginally higher before dropping $12 to $2057 basis March23, with pressure out of India noted as the main pressure off the opening bell. However, this move was short lived as early selling was absorbed as technical buying was uncovered at both the previous low and lower Bollinger band average, triggering a dynamic reversal higher to test back above $2110. The gains held through the remainder of the session as the early commercial short retreated, whilst momentum followers droved solid gains but at a slower pace than observed through the ‘C’ contract, which was reflective in the may23/may23 arbitrage narrowing 6 cents intraday to 85 cents. |
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