The coffee market has been able to gauge the level of return demand from the fast-paced re-opening of the world economy, and it has been a rough start back to say the least. July coffee prices took a dive to violate the 100 level, which should have been a good support area. Although many factors should have been able to support higher coffee prices, we have only seen weakness. Some demand has returned to coffee with the re-opening of the economy, but it has not been nearly enough to offset the upcoming large Brazilian crop that will ultimately need to find a home. Major factors such as continued strength to record highs in the US stock market, a weaker US Dollar and strong Brazilian currency have still not been able to lend support to coffee prices. We should expect to see the same until all restaurant businesses on this planet return to full steam to fill the massive void left unsatisfied by “home demand”.
On the technical side, the violation of the 100 level in July coffee prices should signal a continued move lower, and 100 now becomes our new resistance area. Rather than trying to call a bottom on this market, traders should be advised to follow the trend at this point.