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The coffee market has fallen back from new high ground, as the currently tight supplies could not sustain the rally. May coffee was able to post a fresh 13-year high on Friday but was unable to sustain the early upside breakout and fell back into negative territory later on during the session. The reversal is a potential sign of a near-term top, but the market will need to confirm that with follow-through selling below 271.15 for the May contract. News of falling cash differentials for Colombian coffee in North America may have eased the market’s upward momentum, as that grade of coffee has recently been in short supply. Cash prices remain high for Vietnamese exporters, who are still hard-pressed to find supplies even with indications of a larger coffee crop this season. A report that coffee exports from key African producer Uganda during February were down more than 25% from last year, for the third month in a row, helped to keep coffee prices fairly well supported during most of the session on Friday. The Carnival holidays in Brazil over the early part of this week may cause a short-term disruption in supplies. ICE certified coffee stocks were down 2,000 bags to 1.584 million, with 9,661 bags pending review. The Commitments of Traders reports as of March 1st showed non-commercial traders were net long 33,139 contracts, a decrease of 6,018 contracts for the week. The selling trend is seen as a short-term negative force. Commodity index traders held a net long position of 41,120 contracts.
TODAY’S GUIDANCE: The selling trend of the fund traders plus the overbought condition of the market could help spark a near-term correction, but outside market forces remain strong. While the coffee market has remained near these highs for the past few weeks, the support it has garnered from tight near-term supplies could easily erode if producers sense that price levels are not going to remain at elevated levels. Higher export levels from Central America are likely to end up in the North American market.
TODAY’S MARKET IDEAS: Selling resistance today is at the 257.00 to 279.20 zone with 259.85 and 253.85 as the first key support levels if we see a significant correction.
Coffee: Overbought and Fund Selling but Outside Forces Strong
by Terry Roggensack on March 7, 2011
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
The coffee market has fallen back from new high ground, as the currently tight supplies could not sustain the rally. May coffee was able to post a fresh 13-year high on Friday but was unable to sustain the early upside breakout and fell back into negative territory later on during the session. The reversal is a potential sign of a near-term top, but the market will need to confirm that with follow-through selling below 271.15 for the May contract. News of falling cash differentials for Colombian coffee in North America may have eased the market’s upward momentum, as that grade of coffee has recently been in short supply. Cash prices remain high for Vietnamese exporters, who are still hard-pressed to find supplies even with indications of a larger coffee crop this season. A report that coffee exports from key African producer Uganda during February were down more than 25% from last year, for the third month in a row, helped to keep coffee prices fairly well supported during most of the session on Friday. The Carnival holidays in Brazil over the early part of this week may cause a short-term disruption in supplies. ICE certified coffee stocks were down 2,000 bags to 1.584 million, with 9,661 bags pending review. The Commitments of Traders reports as of March 1st showed non-commercial traders were net long 33,139 contracts, a decrease of 6,018 contracts for the week. The selling trend is seen as a short-term negative force. Commodity index traders held a net long position of 41,120 contracts.
TODAY’S GUIDANCE: The selling trend of the fund traders plus the overbought condition of the market could help spark a near-term correction, but outside market forces remain strong. While the coffee market has remained near these highs for the past few weeks, the support it has garnered from tight near-term supplies could easily erode if producers sense that price levels are not going to remain at elevated levels. Higher export levels from Central America are likely to end up in the North American market.
TODAY’S MARKET IDEAS: Selling resistance today is at the 257.00 to 279.20 zone with 259.85 and 253.85 as the first key support levels if we see a significant correction.
Tags: Coffee, Softs
About Terry Roggensack