Coffee Futures—Coffee futures in the May contract is currently trading up by 205 points or 1.58% at 132.00 a pound higher for the 2nd consecutive session reversing the sharp losses that we witnessed last Friday.
Coffee prices are right at a 4 week high after bottoming out around the 121 level a couple weeks back as I have been recommending a bullish position from around the 126 area and if you took that trade continue to place the stop loss at the 106 level as an exit strategy, however on Friday we will roll over into the July contract due to expiration as those numbers will change.
Coffee prices are trading above their 20 & 100 day moving average and this trend has turned to the upside with the next major level of resistance standing between 132 / 135 and if that is broken I think we could break the most recent high of 140 in the coming weeks ahead.
Fundamentally speaking ongoing dryness in Brazil may curb coffee yields and is supportive of prices. Somar Meteorologia on Monday reported that rain last week in Minas Gerais, Brazil’s largest arabica growing region, measured 6.1 mm, or only 36% of the historical average.
Coffee prices also have support from last Friday’s report from the Green Coffee Association showing that U.S. Mar green coffee inventories fell -1.9% m/m and -5.7% y/y to 5.679 mln bags. At the present time I also have bullish recommendations in orange juice and cotton and I believe sugar prices will continue their bullish momentum as I see no reason to short any commodity at the present time as there is still significant room to run.
CHART STRUCTURE: IMPROVING
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