How Low Are Coffee Prices Going?

06/01/2015 7:00 am EST

Focus: FUTURES

Michael Seery, of SeeryFutures.com,examines the coffee futures market trend to the downside and highlights why he is sitting on the sidelines and not recommending any type of bullish position, though he does suggest looking to other markets with better chart structure.

Coffee Futures—Coffee futures in the July contract settled last Friday in New York at 127 while currently trading at 125 a pound, down about 200 points for the trading week as I’m sitting on the sidelines in this market and certainly not recommending any type of bullish position as the trend is to the downside, but the chart structure is poor as the 10-day high is too far away and does not meet my criteria to enter into a new trade.

Production estimates in Brazil are expected to be very large and that’s what pushing prices lower as the Brazilian real remains extremely weak against the US dollar, which is negative anything that’s grown in the country of Brazil as volatility has slowed down this Memorial-shortened holiday trading week, but look at other markets with better chart structure.

Coffee prices are trading below its 20- and 100-day moving average as I do think there’s a possibility that prices could trade down to the 105 level over the next four-to-six weeks as there’s very little bullish fundamental news to dictate prices to the upside (in my opinion) except possible short covering at this time.

Many of the soft commodities have been going lower, including sugar, orange juice, and coffee in recent weeks as global supplies are just very large and that’s what is continuing to pressure prices as I don’t see that situation changing anytime soon or at least until the next growing season.

Trend: Lower—Chart Structure: Poor

By Michael Seery of SeeryFutures.com

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