BLUE LINE = BRLUSD
The market was able to penetrate 140.00 early in the COT period but was met with what appears to be competitive selling from Index, Swap Dealers, Large Traders and, of course, Commercials. The numbers that we see are remnants of what took place on the upside, as well as what forced prices lower to potentially reverse Managed Money into selling. In RC, where the funds are not algo driven, the buying persisted even as prices fell. We see how Commercials took the opportunity in RC to sell aggressively. In KC, although the two way market may again cloud the complete picture, we see what the buildup of the number of long funds and large traders. The range of the market was 7.80c with a net change of -4.45c.
The remainder of the week brought more selling and more weakness. Prices stalled in the 133.00 general level as commercials bought. But the market succumbed to spec pressure as it broke 130.00 and hitting a low of 128.45, 4.10c lower than the close of the COT period.
To me, what the COT and market behavior combination is saying is that the market is not quite ready for a dramatic move to the upside. The only buyers seem to be funds and the long sellers dont seem to have much faith in higher prices. Commercials are trading mostly delta and there has been some interest by origin on the upside as well as by consumer on the downside. But neither side has been greatly involved even as the Real remained weak. There are bigger consumer bids a couple of cents lower from current levels. Spreads have been on the defensive up to K22 and holding from N22 onward. The N21/U21 spread is trading at -1.80 or -.90 cents per month, while the U1Z1 is trading at -1.75 or -58.33 points per month. In 3 month terms the NU is trading at -2.70, .95c under the UZ, quite a discount. Maybe some traders are anticipating frost possibilities.
The prospects of the market going higher just yet are slim. Even the macro picture has been turning negative. In coffee, at best, it may be a situation like 9697 where serious frosts took place in 96 and the market took off in 97 due to a shortage of supplies. Of course, this comparison is applicable in a much smaller scale today. With the ICO showing excess stocks at above 5mm bags, there may be sufficient coffee for now if the consensus of 52mm bags is correct. Still, tightness may prevail. Covid is presenting a situation where in some parts of the world administration of vaccines is well organized while other parts of the US and the world it is lacking or is irresponsibly handled. It may be relevant to start thinking about the distribution chain being disrupted especially in Brazil.
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