The major pressure currently being added to coffee prices is the somewhat impressive rebound of the US dollar. Inversely, this has put significant pressure on Brazil currency, along with those of other major producing countries. The supply outlook is still very bearish, so nothing new fundamentally has been able to lift coffee prices. At most, we may see short covering bounce, but that will only present a good opportunity to establish new short positions. On the technical side, a violation of the downside 106 corrective low from August 2 was violated with Monday’s price action, and subsequently, we have seen three consecutive days down in follow-through selling. Once these areas are violated, we tend to see a pullback (typically around 50% retracement), which may be a good place to re-enter short positions. For now, we’ll continue to hold a bearish outlook but hold off on new positions until we see a rally back to approximately 107. Consider using put options to manage risk effectively.

Listen to my recent #TechnicalTuesday – Trend Lines & Trend Channels discussion with Futures Radio Show where I talk about the technical analysis process in the coffee market.

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.