US economic indicators behind expectations, rising trade tensions with China and US troops being sent to the Middle East pressured stock markets in the last five business days.
The Dollar Index traded at a new high of the year and then slid due to lower-than-expected manufacturing data, lower housing numbers and declining durable goods orders.
The Brazilian Real devalued R$ 4.1211 in the week, the highest level since the R$ 4.2133 we have seen on August 30th, 2018 and still a little bit far from the record of R$ 4.2475 traded on September 24th, 2015.
The CRB tumbled with the collapse of oil and gasoline, commodities whose inventories have been rising in recent weeks when historically stocks should be going lower given higher demand at the beginning of the travel season – which started on this long weekend marked my today’s Memorial Day.
Fear of World economic slowdown weighted heavily on commodities not even sparing energy, which could be building up some premium in the wake of a possible Middle East conflict – aggravated by threats of attack on Iran.
Coffee was the biggest winner of the week, rising 6.75% in New York and 4.5% in London, a move triggered by the arrival of the first cold front in Brazil and the break of technical levels in the chart.
Although the chances of frost in the Brazilian coffee plantations have diminished a lot these days, the funds decided to buy the market, according to the last COT report, and curiously the gross-short did not change much.
The price rebound also came after lighter selling from origins was felt near 90 cents, level that has found good support for a few weeks, and London has attracted commercial buying interest.
The differentials hardly changed, even with the weakening of currencies of the producing countries, however the flow of business has improved.
The USDA began releasing its coffee crop estimates for the 2019/2020 cycle and among origins reports, it repeated the same 14.3 million produced in Colombia on 18/19, with small changes for Vietnam (30.5 million), Indonesia (10.7 million), Peru (4.5 million) and Guatemala (3.39 million bags).
For India, the entity expects an increase of 300 thousand bags of robusta, or a total of 5.48 million bags to be harvested between the two varieties.
In Brazil the expected harvest is 59.3 million bags, divided between 41 million arabica and 18.3 million conilon, and for the 18/19 harvest, the USDA revised the harvest to 64.8 million bags – the previous number was 63.4 million of bags. The domestic consumption considered by the Department of Agriculture was 23.53 million bags, which makes the exportable surplus not that different from what the market believes.
The European Coffee Federation reported that green coffee stocks in most European ports totaled 6,229,217 bags by the end of March, or 170,849 bags less than in February. Exactly one year ago, the volume of the inventory was 5.4 million bags, and from October onwards, when more coffees from Brazil began to arrive there, the variation was 57,000 more bags – almost nothing if we consider the volume shipped in the period.
The weekly settlement was not bad, technically speaking, but we might see some short-term profit taking after the long holiday, especially after the weather did not reach the low single digits that some forecasters predicted.
Points to be observed in the chart are 95.25 and 90.20, levels that if broken will accelerate the move to the upside or downside.
I hope to find some of you at the always pleasant and well-organized Coffee Dinner at the beautiful Júlio Prestes Station in Sao Paulo tomorrow.
Wishing you a nice week,
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