Global coffee deficit expected
Brazilian Cecafe association of coffee exporters reports higher demand. The green coffee shippings rose in March to 2.69mln 60kg bags from 2.61mln bags in February while coffee crops suffered in Brazil in 2014 and early 2015 due to droughts. Cecafe stated that in the recent 12 months exports totaled 33mln bags. To meet the domestic and global coffee demand Brazil needs to collect 58mln bags. Will coffee prices continue advancing?
Total coffee exports of all varieties from Brazil amounted to 2.99mln bags this March which is 4.5% below the level of March 2015. The agricultural Marex Spectron forecasts coffee crops in Brazil to be 57.5-58mln bags in 2016/17 and 49.5mln bags in 2015/16. Due to such a difference the global coffee deficit may total 3.4mln bags. According to Marex Spectron, the coffee deficit will aggravate because of the fall of Brazilian coffee exports to 2.5mln bags. As we may see, no such evidence is seen in March so far. Nevertheless, in recent two days coffee prices have been on the rise. The Brazilian real strengthened 12% against the US dollar since early March. We believe this may support coffee prices.
Coffee
On the daily chart Coffee: D1 is in the middle of the descending channel and is struggling for growth towards its upper boundary. The MACD and Parabolic indicators still give bearish signals. RSI is rising yet but has not reached the level of 50 so far. No divergence. The Bollinger bands have contracted which means lower volatility. The bullish momentum may develop in case the coffee prices surpass the last fractal high, the Parabolic and 200-day moving average at 131. This level may serve the point of entry. The initial risk-limit may be placed below the last fractal low at 120.5. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 120.5 without reaching the order at 131 we recommend cancelling the position: the market sustains internal changes which were not taken into account.
Position Buy
Buy stop above 131
Stop loss below 120.5
This overview has an informative character and is not financial advice or a recommendation. IFCMarkets. Corp. under any circumstances is not liable for any action taken by someone else after reading this article.
Recommended Content
Editors’ Picks
EUR/USD retreats to 1.0750, eyes on Fedspeak
EUR/USD stays under modest bearish pressure and trades slightly near 1.0750 on Wednesday. Hawkish comments from Fed officials help the US Dollar stay resilient and don't allow the pair to stage a rebound.
GBP/USD struggles to hold above 1.2500 ahead of Thursday's BoE event
GBP/USD stays on the back foot and trades in negative territory below 1.2500 after losing nearly 0.5% on Tuesday. The renewed US Dollar strength on hawkish Fed comments weighs on the pair as market focus shifts to the BoE's policy announcements on Thursday.
Gold fluctuates in narrow range below $2,320
After retreating to the $2,310 area early Wednesday, Gold regained its traction and rose toward $2,320. Hawkish tone of Fed policymakers help the US Treasury bond yields edge higher and make it difficult for XAU/USD to gather bullish momentum.
SEC vs. Ripple lawsuit sees redacted filing go public, XRP dips to $0.51
Ripple (XRP) dipped to $0.51 low on Wednesday, erasing its gains from earlier this week. The Securities and Exchange Commission (SEC) filing is now public, in its redacted version.
Softer growth, cooler inflation and rate cuts remain on the horizon
Economic growth in the US appears to be in solid shape. Although real GDP growth came in well below consensus expectations, the headline miss was mostly the result of larger-than-anticipated drags from trade and inventories.