China announced it will retaliate the US (even after president Trump warned that the country should not do it) turning markets even lower after last week worst performance of the stock market in 2019.
The US president strategy might lower World growth and some analysts mention it could be a turning point for a potential recession, which if happens here it could make the race for re-election in 2020 a bit more challenging for Donald.
As risky assets sold off, commodities also suffered the impact with the CRB near February lows led by sharp losses of cotton, copper and grains.
Coffee got under pressure by the steep fall of London last Tuesday, which gave room for New York to make a new contract low – within the idea mentioned here of the arbitrage eventually taking away the “support”.
Robusta has recovered quite well afterwards, partially helped by commercials buying appetite and then some speculators short covering, but arabica settled below US$ 90 cents again.
High differentials for Uganda, Indonesia and Vietnam should, in theory, prevent further downward moves in London, but at the same time whoever had placed bets on the tight/firm basis of arabicas has not done well in the past years.
It is hard to say that new lows will not be tested given the perception of the good availability/inventories of robusta, producers holding back/rolling price fixation and lastly because of the exportable “excess” of conilons that shall be delivered at the terminal.
Arabica also suffers from similar issues, like comfortable stocks and the selling needs from the three main origins, more so on two largest ones that are in the harvest period.
In Brazil, April exports totaled 2,975,057 bags and previous shipments were revised upwards – including December, which stood at 4,001,029 bags, breaking the 4 million bags barrier for the first time.
Assuming the same shipment pace of 2.9 million bags in May and June is kept then total exports for the current crop year is likely to be over 40 million – which ironically still makes the carry-over estimated by several participants relatively high.
Colombia reported that its coffee planted area has started to decline due to lower international prices. The FNC’s president told the newswires that 40,000 hectares of coffee area are being converted to other crops.
The hope for the “C” market to turn up now relies on the Real. If the Brazilian pension reform is approved this semester, the currency can firm, helping New York to find a bottom.
The CFTC’s report showed that commercials still have buying appetite on futures and options, not bad for those who thought that the buying would get thinner given the continued weakness of the board.
Managed-money, on the other hand, can potently add a lot on their short-side, comparing to the levels we saw in October 2018, especially without any change on the fundamentals.
NY first support is at 87.60, followed then by 86.35 and 84.45. Resistance levels are at 91.50, 93.80 and 94.75. London recent low at US$ 1267 per ton is a key point to be respected, otherwise 1212 and 1162 will be the next support areas to be tested. On the upside we shall look at 1379 and 1427 as resistance levels.
Have a nice week and good trades.
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