The slow but sure re-opening of the world economy has the prices of September coffee futures quite confused at the minute. You have a strong stock market bouncing back due to reopening and continued massive support from the Fed, weighed directly against the promise of continued new COVID 19 cases that have the US and China slowing things down until we can see a clear impact. As many prepare to return to work, shopping and dining outside of their homes, the current weak demand must show some promise for September coffee prices to find support. Many restaurants and coffee shops that have managed to remain solvent (quite remarkably), while complying with social distancing guidelines will continue to suffer until they can enjoy doing business at 100% capacity.  Until then, with a sizeable Brazilian crop on the horizon and continued uncertainty of demand, coffee prices will likely continue lower.

From a technical perspective, a clear and violent violation of the 105 level to the downside (see daily chart attached) may see a pull back to that level before a continued selloff. While these massive swings in coffee prices continue, with questionable demand on the horizon, many traders may benefit from either being short or staying in cash for the time being.

Coffee Sep ’20 Daily Chart

Adam Tuiaana

Adam grew up in Chicago and was always fascinated by the fast-paced action found in the futures market hub there. He began participating in the financial markets by trading stocks in 1997 and began his career as a trading consultant with RJO Futures in March of 2009. At RJO, he specializes in risk management and disciplined trading plans, and is focused on educating clients with one-on-one consulting and training. Adam believes the best approach to trading is to take a measured and objective approach and let the markets guide your decisions.