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May coffee has seen a 930 point surge in just six trading sessions and is showing strong technical signs that a major low is in place. Corrective breaks of the short-term overbought condition look like buying opportunities. The bullish technical action, the hefty net short position by the funds and ideas that there could be inflationary undertones to commodity markets ahead helped to drive coffee prices higher again yesterday. World coffee demand looks steady for the coming year, while production could be down as much as 6%. May coffee pushed to its highest level since February 12th yesterday and moved above the 100-day moving average for the first time since February 10th. The surge higher in metal and energy markets along with a sharp sell-off in the US dollar helped to support the market, and fund traders were active buyers. A more positive tone for the economy and some hints of inflation creeping into commodity prices helped to support the market as well. Brazil crop conditions remain favorable, but the off-cycle year production should push the crop down by 6-8 million bags from last year. Colombia’s production looks to be down around 5%, and tightness in the cash market has helped support the bounce off of the lows. Declining exchange stocks over the past few weeks and less pressure from producer selling helped to support. ICE certified Arabica stocks were down 96,660 bags in the previous five sessions and were down another 10,879 yesterday to 4.039 million bags with 800 pending review. Coffee exports from Brazil for the March 1st to 18th time frame reached 1.058 million bags as compared with 1.445 million bags last month by this date.
TODAY’S GUIDANCE: Buying support for July coffee comes in at the 116.10-114.40 zone with 122.90 and 123.95 as next resistance and targets.
