Commodities move up after positive chinese data
The DowJones, the S&P500, the Russell300 and the Nasdaq indexes all made new all-time highs after the FED cut interest rates again and jobs creation in October came out higher than expected.
The markets have ignored the approval by the lower house on the rules defining the next steps on president Donald Trump impeachment process as investors focus on robust corporate results.
China’s manufacturing activity in October was another positive (and surprising) news as the index reached the highest level since February 2017, and as it has happened after tariffs took place investors jumped in to buy commodities, among other risk-asset classes.
Arabica coffee gained US$ 3.15 cents in the past five sessions, ranking the second-best performer among the CRB components, after it was able to recover intraday negative pressures to then break up technical indicators that attracted more fund’s short covering.
Fundamental Focus
Pictures and videos of isolated hailstorms in some Brazilian producing areas, an October with below-average rainfall and news of declining availability from the World’s largest coffee cooperative apparently might have helped to bring some support for the terminal.
Those who were (are?) short calls also had to cover their exposure (this Friday Dec options expire) and the higher market unveiled price fixation from origins as an improved availability in Brazil favored those who need to cover their needs in the cash market.
If NY can sustain and rally even further it would be beneficial for a better flow also from mild producing countries that are likely to have more coffee available in the next weeks.
As far as weather is concerned in Brazil, rains have fallen during the weekend and more is expected for November, providing trees what is needed to keep the buds that will become fruits (coffee) for the next crop.
The BRL has gained ground with a positive influx of capital in the BOVESPA stock market lately, reaping the valuable approval of the pension reform in a background of increasing monetary expansion from the main economies.
Some bank analysts have turned more positive in the country with the risk-premium decreasing as the Finance Minister (Paulo Guedes) as well as the Ministry of Infrastructure (Tarcisio Freitas) – and other skilled government officials – have been doing a diligent and intelligently job to diminish the size of the state, taking advantage of the foggy-curtain created by the controversial statements that the president and his sons insist in making.
Farmers have been taking the opportunity when the “C” moves up, either by securing forward sales or through forward barter deals, even though domestic interest rates have been cut to “only” 4.5% per year decreasing the curve of the dollar.
Looking at differentials at pretty much all origins bulls still argue that listed future coffee markets should still go higher, but this “trend indicator” that was long used for flat-price position taking has hurt many in the past two or three years and everyone seems to be more interested trading on the macroeconomic influences.
On that matter the CRB settled today at the intraday low (after gapping up) and the DXY strengthened back near to pre-FOMC meeting levels – apart from a not so good technical performance of coffee markets (see below).
Technical Focus
The upside momentum failed today to breach the high of September 16th, 104.95 (for Dec19 contract), and on the second month continuous chart the 108.40 resistance was also respected – you can see the later tracing a line from the highs of October 2018 and last July. A settlement under the 200-day moving average, 103.50, will make the next objective 101.75 and then if the market breaks 100.00 it shall attract more selling to test the lower part of the current 90 to 110 cents interval. On the upside we need to see a close above 104.95 to eventually test US$ 109.50 cents per pound. London Jan19 contract has 1,295 as first support, followed by 1,269, 1,230 and 1,211. On the resistance side we have 1,342, 1,402 and 1,431 USD/ton.
Wishing you a pleasant week,
Rodrigo Costa
Skype: rodrigoccosta10
WhatsApp: +1 646 468 7091