Andy Hecht

Top 3 Ranking in Commodities, Metals & FX --SeekingAlpha

The Bullish Reversal In Coffee Was A Signal

Last Friday, I posted a brief piece on the bullish reversal on the weekly chart for ICE coffee futures. July coffee closed on May 24, at 93.20 cents per pound and opened at the same level on Monday, May 27. Since then, the price of Arabica coffee futures has taken off on the upside.

Source: CQG

As the daily chart of July futures shows, coffee followed through on the upside, rising to a high at $1.0275 per pound on May 30, and settling the session not far off its peak at $1.0235 per pound. Coffee is now at its highest price since mid-March, and the next level of technical resistance is at just under $1.13 per pound. The target on the upside is the October peak at $1.2550 per pound. One of the reasons for the move in coffee was the rise in the Brazilian real.

Source: CQG

As the daily chart shows, the real rose from $0.24225 on May 20 to $0.2513 on May 30. Since Brazil is the world's leading producer of Arabica coffee beans, the move to the upside in the currency has supported the price of coffee futures. At the same time, Brazil is also the world's leading producer of both sugarcane and oranges, and sugar and FCOJ posted gains on May 30. 

The coffee market looks like it is percolating again. The JO ETN product closed at $32.75 on May 24 and moved to $35.78 on May 30, a rise of over 9% since last Friday. I suggest trailing stops on long positions as I continue to favor the prospects for the price of coffee.

Andy Hecht covers Commodities and Forex as one of the original contributing analysts at FATRADER. A former senior trader at one of the world’s leading commodities trading houses, Philipp Brothers (now part of Citigroup), Andy has worked and consulted for banks, hedge funds, and commodities producers and consumers around the world for over 35 years.
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