May 30, 2019
Last Friday, on May 24, 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.
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.
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.