Coffee fundamentals are the major driver to this incredibly bearish situation. Say what you will about September coffee being oversold, but you cannot ignore the fact that the supply/demand situation continues to suffocate coffee prices. The Hightower Group has reported “record high production from Brazil and a likely record high crop from Vietnam”. In addition, we’re seeing some added pressure on the Brazilian currency while the US dollar continues to show signs of strength.

On the technical side, coffee struggles to hold support at 105, and reached sub 100 levels this past week. We’re now seeing a short-covering rally, but expect some solid resistance at the 105 area now. For now, we’ll continue to hold a bearish outlook but hold off on new positions until we see a rally back to approximately 10550. Consider using put options to manage risk effectively.

Coffee Sep ’18 Daily Chart

Coffee Sep 18' 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.