Coffee Traders' Forum - A Discussion about Coffee Futures Trading
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STRONG EURO TAKES NEW YORK BACK TO 2014 PRICES
An article citing Trump's "obsession" with Amazon power, including “recycled” statements, from when Donald was then a presidential candidate, mentioning about lower tax payments by the company, has caused the stock to sink, resulting in a loss of US$ 94 billion in market capitalization in just a week.
The technology sector has also been hit by the “data leakage” issues of Facebook, a company that knows more about the users than the users themselves – a recurrent comment made by several analysts.
The major European and US equity indices ended the first quarter with cumulative losses of 1.22%, such as the S&P500 and 8.21%, like the FTSE100 - the DAX slipped 6.35%. Even with the falls of major technology companies the NASDAQ had a positive performance of 2.32% in the first three months of the year, which was erased on today’s session.
The CRB is virtually at the same level as in the beginning of 2018 and among the components of the index the winners up to the end of March are: cocoa, gasoline, corn, soybeans and crude oil, with positive performances of 35.10%, 12.16%, 10.55%, 9.77% and 7.48%, respectively. The worst performers were lean hogs, -20.24%, raw sugar, -18.54%, aluminum, -11.62% and copper, -8.33%.
Arabica coffee lost 6.38% in the year, bad, but not catastrophic, although it feels like it has slid a lot more. Robusta on Dec. 29 closed at US$ 1,718 a ton and last Thursday at 1,725 dollars per ton.
Speculators have once again set a new record gross-short position, as well as the commercial gross-long is at the highest volume in history, in an also record open interest, equivalent to 78.47 million bags, or around 78% of what the World will produce in the 18/19 cycle – if we consider the CIT report, which mingles options, the OI is equal to 90.3 million bags.
It is curious to note that some funds are betting on a bounce, even with the terminal making new contract lows – last week. Maybe today the new low was provoked by some of these new longs being washed out.
Another fact worth mentioning is the conversion of the “C” into the currencies of the main origins. For Brazilians the current level, R$ 392.20 cents per pound, is well below the R$ 466.66 cents in August last year, or the high of 2017 that was R$ 504.90 cents. But if it is bad for the producers in Brazil, for those in Colombia the situation is even worse. The COL 3,321.49 cents per pound today is the lowest level since July 2015, as the Peso has not depreciated as much as the Real, recently.
Arabica in New York in Honduran Lempiras is at HNL 28.01 cents, not so far from the HNL 27.07 cents of last June, but still above the levels of 2015 - close to HNL 25.00 cents.
The main consumer market, Europe, continues to take advantage of the lowest levels in more than four years, fixing the flat-price below 1 euro per pound and after applying the "expensive" differentials for natural coffee, for example, the bottom line of the purchases is under EUR 90.00 cents per pound.
One would think that commercial buying shall linger around and on further falls, just as origins have appeared at any small gains of the terminal. For those afraid of commercials being too long and eventually being forced out, it does not hurt to remind that they are strong holders, different from the commercial-short that are more diluted and less resilient. Specs could also quickly change their positioning, but for that we still need a fundamental reason or a technical break-out.
Vietnam's exports totaled 3.17 million bags in March, up from 2.8 million a year ago, and accumulating 8.67 million bags in the quarter, or 15% higher than the first quarter of 2017. Brazil shipments in April will likely be just over 2 mln bags.
The month of April will mark the beginning of the conilon crop in the last fortnight mainly for some regions in Brazil, and soon the market will be paying more attention to the weather in the Brazilian coffee-belt, initially monitoring the rains during the harvest, and then eventual low-pressure systems during the cold season.
A large crop such as 2018/2019 takes longer to be harvested, with an additional risk of subsequent loss of quality if the weather is not ideal. On the other hand, it does not seem to be worrisome for buyers because at the end the day there might be enough good coffee around, given the expected volume to be produced.
The complacency of the market participants shortening the market and selling low-implied-volatility has a great combustion effect if there is any surprise, as demonstrated in cocoa in the last ninety days.
New York May18 contract today’s outside day, settling near the low, shall bring more selling tomorrow to test US$ 115.50 cts/lb. Breaking this first support will make 113.00 the next target, followed by 109.90. The 20day moving average, now at 119.30, has proven to be a tough resistance that the market has failed to stay above it in the past thirty days. Maybe it is not as important as the 40 and 50day averages that are at 121.00 and 121.80, respectively. At 124.90 we might trigger larger buy-stops to eventually change the bearish mode that for now (and forever?) remains intact.
Have a nice week and good trades.