Technical analysis: Will the coffee quotes continue to rise?

Dmitry Lukashov IFC Markets

Coffee technical analysis summary

Buy Stop։ Above 230.

Stop Loss: Below 208.

Indicator	Signal
RSI	Buy
MACD	Buy
MA(200)	Buy
Fractals	Buy
Parabolic SAR	Buy
Bollinger Bands	Neutral

Coffee chart analysis

On the daily timeframe, COFFEE: D1 has exceeded the downtrend resistance line and is trying to exit the triangle for the 2nd time. A number of technical analysis indicators formed signals for further growth. We do not rule out a bullish movement if COFFEE: D1 rises above its latest high and upper Bollinger band: 230. This level can be used as an entry point. The initial risk limit is possible below the 200-day moving average line, the Parabolic signal and the last two lower fractals: 208. After opening a pending order, we move the stop following the Bollinger and Parabolic signals to the next fractal low. Thus, we change the potential profit/loss ratio in our favor. The most cautious traders after making a trade can switch to a four-hour chart and set a stop loss, moving it in the direction of movement. If the price overcomes the stop level (208) without activating the order (230), it is recommended to delete the order: there are internal changes in the market that were not taken into account.

Fundamental analysis of commodities – Coffee

Brazil is experiencing drought and is at risk of frost. Will the COFFEE quotes continue to rise?

Somar Meteorologia reported that in the Brazilian state of Minas Gerais, last week the rainfall was 52% less than the historical average. This state produces 30% of Brazilian Arabica coffee. CONAB has cut its coffee production forecast for Brazil in the 2022/2023 season by 2.3 million bags (60kg) from its previous estimate in January to 53.43 million bags. At the same time, it may still be 12% more compared to the previous season, but 15.3% less than the 2020/2021 season. It should be noted that various Western agricultural agencies are expecting a much larger coffee crop in Brazil this season - approximately 63-64 million bags. If they start to revise their forecasts downward before the official CONAB estimate, then this could positively affect the quotes. In the meantime, the Cecafé agency reported a decrease in coffee exports from Brazil in January-April 2022 by 10.6% compared to the same period in 2021. In April, Brazilian coffee exports fell 24.3% to 2.56 million bags. The Colombian Coffee Growers Federation reported an 18% y/y cut in coffee exports from Colombia in April to 875,000 bags.

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Author

Dmitry Lukashov

IFC Markets

Dimtry Lukashov is the senior analyst of IFC Markets. He started his professional career in the financial market as a trader interested in stocks and obligations.

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