Coffee Futures–-Coffee futures in the December contract is currently trading lower by 100 points at 107.95 a pound continuing its bearish momentum this Monday afternoon in New York. I have been recommending a bullish position from around the 109.55 level and if you took that trade continue to place the stop loss under the contract low at 96.90 as an exit strategy as this is a counter-trend trade.
Fundamentally speaking prices on Friday initially fell to 2-1/4 month lows after the International Coffee Organization (ICO) hiked its global 2019/20 coffee surplus estimate to 1.54 mln bags from a prior estimate of 952,000 bags as it cut its 2019/20 global coffee consumption estimate to a decline of -0.5% y/y to 167.807 mln bags from a prior estimate of +0.3% y/y. However, coffee prices recovered from their worst levels, and arabica pushed higher, after Marex Spectron said Friday that Brazil’s 2021 coffee output decline might be twice as much as usual in the lower-yielding half of a biennial cycle because of drought.
Coffee prices are trading below their 20 and 100 day moving average as the trend remains negative, however I do think the downside is limited as I will play this to the upside while keeping a close eye on weather conditions in the country of Brazil.
CHART STRUCTURE: SOLID
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