Despite a “risk-on” mood, traders still continue to act bearishly upon May coffee prices. Very large supplies, coupled with favorable weather over Brazil’s Arabica growing region, are fundamental factors that are keeping pressure on May coffee prices. Although many are reporting that May coffee is oversold and due for bounce back up, we will continue to stay in the way of the trend as we await the start of the Brazilian harvest next month.
On the daily chart of May coffee below, we can see the violation of the 13518 critical low, which shortly after, was followed up by some sideways consolidation. This violation is indeed bearish, despite the oversold condition of May coffee prices. We can now see a coiling pattern formation that should produce a sizable move, but that move is likely to be further down to continue this trend. It is likely that May coffee prices will revisit those not seen since a year ago. Barring any substantial geopolitical issues that may occur, look for a visit down to the 127 area over the next week or so.
May ’17 Coffee Daily Chart