Blue Line = BRLUSD
The market began at the lows of the period and closed at the highs. As the week progressed, we saw little change in the total OI from one day to the next. Sep however, dropped in both markets as funds covered in both. The reason for the disparity between the Sep contract and the total OI is reflected in the long funds and swap dealers categories who bought new and sold new respectively. In addition, new spreads were initiated. In Robusta, funds also covered shorts but the Sep change is not as high as in Arabica because commercials sold new.
Funds in both markets are approaching a flat net position and maybe they achieved this in the days following the COT. In Arabica, the number of traders are net long as 16 funds reversed and four short funds liquidated. It has been typical in the past for funds to reverse and continue to buy, or sell, depending on trend and momentum.
The market is certainly steady. Fundamentals are still bearish imo. The macro is changing, however, as the dollar is dropping and other markets are rising. The Real and coffee have become unrelated. On Friday for example, the Real dropped sharply while the market remained strong. Itís important to note that the combination of the weak Real and strong futures attracted a great deal of forward selling extending out to May23. The combination of front fund buying and forward origin selling caused spreads to tighten sharply. The Sep22Dec22 traded from -1.50 to -.70, for example.
Spreads continue to be steady on their own. The SepDec stopped dropping exactly at the same level as its predecessor, the JulSep, in terms of points per month. Today, calls on spreads were very much in demand in SepDec. The DecMar has stalled after being strong and puts on spreads were being bought. Will the disparity between this spread and the next spread, MarMay, widen as the SepDec DecMar did?
The market is behaving very steady as corrections continue to present opportunities. Personally, Iíll go long for day trade purposes only. It may not be the wiser strategy but selling is heavy in the form of long liquidation, new selling and origin selling. And 68mm bags continues to pop up in my mind when thinking of the market. But the trend points to higher prices so weíll see. Maybe coffee is the new gold, or silver
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