Bullish Fundamentals Brewing For Coffee?
Today’s Spotlight Market
Large speculators have been lightening up on their net-short positions for Coffee the past week according to the most recent Commitment of Traders report. For the week ending October 6th, non-commercial traders reduced their overall net-short position by just over 7,800 contracts to 12,566 contracts. Commercial traders are on the other side of the trade, having reduced their net-long positions by just over 7,300 contracts. Small speculators reduced their net-long position by nearly 500 contracts to 2,633 contracts.
Fundamentals
Coffee bears have had their way for the past 4 years, as a global commodity bear market combined with weakening emerging market currencies took their toll on Coffee prices. However as 2015 enters the final quarter of the year, we are starting to see some bullish movement for Coffee prices. Dry conditions are being cited by analysts for the recent rebound in Coffee prices, as several key Coffee growing regions, most notability Brazil, are experiencing less than ideal weather conditions. In addition, low Coffee prices the past few years have cut into producer?s profits and, in turn, have forced many Coffee growers to forgo or reduce investment in fertilizers and maintenance, which could have a meaningful effect on production in the coming seasons. Coffee traders also have become keen watchers of the currency markets, and especially the performance of the Brazilian Real. Weakness in the value of the Real has created the incentive for producers to sell Coffee into the global market despite current depressed prices. While it is still too early to definitely call an end to the Coffee bear market that began back in 2011,? signs are beginning to emerge that traders are starting to warm-up to the possibility of higher Coffee prices going into 2016. ?
Technical Notes – View Today’s Chart
Looking at the weekly continuation chart for Coffee futures going back to 2011, we note what might be a double-bottom formation, as the lows made back in September of this year could be a failed test of the major lows made back in November 2013. Prices are currently above the 20-week moving average (MA) but remain below the 200-day MA which is currently near the 155.00 price area. The 14-week RSI has turned neutra,l with a current reading of 53.30. 113.35 is seen as support for the front-month future, with resistance seen at 147.35.
——————————————————————————————————-
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control. Derivatives involve substantial risk and are not appropriate for all investors. Please read the “Disclosure Statement for Futures and Options” prior to investing in futures or options. For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and other risks apply.