Blue line = BRLUSD
The range narrowed to 6.45c with several attempts to rally and the net change was merely a negative 1.10c during this COT period. Funds in both markets are obviously in a sell mode, and, true to fund behavior, they do not react to news, currency, fundamentals nor, in this case, weather.
Dry conditions are present in the coffee areas of Brazil. Temperatures are 40 degrees plus and any rain results in net drying. Although the weather needs to be watched it is not at a critical state, from what I read. Plants are under stress but are still viable.
Most of the fund selling has been liquidation. There was new selling by index funds either in the form of outright or options. There was also new selling by swap dealers which could be institutional. Right now funds in KC are net long 34,804 lots. They do have the potential of flattening and going net short but funds are momentum motivated and if the market turns sufficiently, they will reverse as well. For now the COT is telling us that funds are selling and will keep pressure on prices.
The rest of the week showed continued weakness mostly from Robusta. On Friday prices dropped to 104.90 with good volume and commercial buying. From that point we saw an impressive rally possibly due to short covering typical of a Friday.
The DecMar was very weak while other spreads remained steady. It traded to -2.20 as funds hit the front month and spread sellers emerged as backwardation never materialized.
We will see if Friday’s sudden strength will have any follow-through on Monday. If not, the market will continue to be heavy but with bids building across the board, likely the consumer end. From what I see, prices are now above the RC 200 day and below the KC 200 day MA.