Demand has been warm to weak for coffee, and coupled with rising output from Vietnam, we can assume that the bear camp will continue to hold the reins. In addition, news that El Nino will likely have little or no impact on Vietnam’s coffee production will likely keep the bulls in check for now. Outside forces impacting coffee prices may include the devastating terror attack in the UK and overnight credit downgrade of China, producing flight to quality strength in the US Dollar, which inversely pushes most commodity prices down.

On the daily chart of July coffee below, we can see the violation of the 13750 critical low from December 28, which shortly after, was followed up by some short covering and sideways consolidation. We now see coffee prices diving back to the near term critical support area of 12865. This area is key to monitor because a violation of this area spells a continuation of the downtrend, likely back to lows not seen since June of last year.

 

Jul ’17 Coffee Daily Chart