COFFEE: Overbought and Vulnerable to Correction; 228.65 Support

Coffee's March/April recovery move ran out of steam as near-term demand concerns are weighing on market sentiment. With bullish supply factors continuing to provide support, coffee should be able to hold its ground on corrective breaks. July coffee reached a new 6-week high early in the day, but closed lower. A rebound in the Brazilian currency provided coffee with an early source of carryover support as that will further encourage Brazil's farmers to hold onto the 10% to 20% of remaining 2021/22 Arabica that is still unsold. Russia's invasion of Ukraine is unlikely to end over the near future, and that has diminished prospects for out-of-home consumption, particularly in Europe.

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There are also reports that shipments of coffee originally headed for Russia will be diverted to other destinations, and that may ease near-term supply tightness in those regions. ICE exchange coffee stocks (most of which are housed in Belgium and Germany) rose by 5,416 bags on Tuesday and moved back above their March month-end total. Rainfall over Brazil's major Arabica-growing regions was below normal last week while the current La Nina weather event should bring drier than normal conditions to the region through mid-year, and that could have a negative impact on their upcoming 2022/23 "on-year" crop.

TODAY'S MARKET IDEAS

Coffee continues to find support from production issues in Brazil and Colombia, who combined accounts for more than half of global Arabica production. Near-term support for July coffee is at 228.65, with resistance at 237.25 and 240.10.

COFFEE TECHNICAL OUTLOOK

Note: Data is collected using the closing values of the previous session and calculations and analysis are run at the same time. Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report. Data sources can and do produce bad ticks that can cause computation errors. Please verify before use.

COFFEE (JUL) 04/13/2022: Rising stochastics at overbought levels warrant some caution for bulls. The market's close above the 9-day moving average suggests the short-term trend remains positive. The market could take on a defensive posture with the daily closing price reversal down. It is a slightly negative indicator that the close was lower than the pivot swing number. The next upside objective is 239.41. The next area of resistance is around 236.07 and 239.41, while 1st support hits today at 231.03 and below there at 229.32.