March coffee futures have been breaking out recently, clearing all levels of resistance, mostly in part due to the continued bullish outlook for 2021/2022 crop year. This bullish supply outlook is due to the extremely dry weather in Brazil earlier this year, and the subsequent wet weather events precipitated by El Nina have not proven to be enough to offset the tight supply. Although there is wet weather forecasted for this week for the Brazilian States of Sao Paulo and Minas Gerias, these rains also most likely will not be enough to offset the supply effects of the earlier dry weather.
The UK and EU have also seen less demand due to Covid restrictions, but the announcement of the distribution of the Pfizer vaccine, along with several other vaccines on the horizon, give the much awaited promise that many will gain the confidence to overcome their fears of returning to coffee shops and restaurants, and ultimately their lives as they knew them.
From a technical perspective, strong support is being held at the 200-MA, resting at 1.14. In addition, a break above the key resistance level of 1.25 is also very bullish, and RSI and Volume levels holding steady. It is likely that corrective action will take place, back down to 120, before another leg higher is made.
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