The price action in December coffee has been quite supportive, with higher highs and lows consistently. Many fundamentals, such as a strong Brazilian currency and weaker U.S. dollar have lent some strong support to December coffee prices, as well as several other commodities. At this point, many traders have eyes on weather issues that may be forming in key growing areas of Brazil, coupled with the expectation that the second largest producing country, Vietnam, will fall short of its projected exports. Our friends at The Hightower Group have reported that “Vietnam coffee exports are expected to come in at 1.365 million tonnes (22.75 million bags) which is 13.8% behind last year’s pace. ICE exchange coffee stocks rose by 180 bags on Tuesday but with 2 days to go remain nearly 38,000 below September’s month-end total.”
On the technical side, a battle awaits at the 103-resistance level in the near term, and after a noticeably impressive rally, a correction is likely at this point. Momentum levels are strong, but until we get a good feel for how bad the upcoming weather conditions in Brazil will be, we are likely to see December coffee prices remain in a sideways consolidation pattern.