News from Brazil is that the 2017/18 output for coffee is actually falling approximately 10% compared to last season. This potential for less supply may be the force that not only allows support to coffee prices, but in fact may push them higher. However, this bullish news may see offset with a strengthening USD which will put pressure on all commodities (with probably the exception of gold and crude).

On the daily chart of May coffee below, we can see the violation of the 13860 critical low, which shortly after, was followed up by some short covering. Over the past few trading sessions, we’ve been able to recover from the 138 levels, and may see a move back up to 145. As I mentioned in my last article, the key area to monitor is the 13520. If this area is able to hold support, we may see a bounce back to higher coffee prices. However, a violation of this area spells a major selloff, likely back to lows not seen since June of last year.