In May and June we will see what the Brazilian harvest has to offer. Many believe that the numbers will be less tight than expected, which should help the bears take control. Adequate supplies should mean resistance levels will keep coffee prices from moving higher. In addition, the USD is seeing a strong boost, which continues to put pressure on most soft commodities. Big funds may be gearing up for a large short position, as open interest is at very high levels.

 

On the daily chart of March coffee below, we can see the violation of the 13860 critical low on March 24, which shortly after, was followed up by a quick correction and consolidation. So far, a quiet day in today’s price action, but in the near term, traders should look for a re-test of the December low of 13520. If this area is able to hold support, we may see a bounce back to the top of the range, say 14550. However, a violation of this area spells a major selloff, likely back to lows not seen since June of last year.