BLUE LINE = BRLUSD
After opening on a positive note, the market began its decline of 19.55c to the low 232.40. The drop continued during the days after the COT report to a low of 220.45, for a total drop of 31.50c. The selling came from managed money, including index, and swap dealers in KC. The reason for the drop could be attributed to the Russian assault on Ukraine. As equities dropped, coffee fallowed. Index funds and the institutional sector likely disposed their positions as the dollar rallied and other markets dropped. Momentum funds would have been sellers anyway and remained sellers on Friday. However, prices closed firmly.
The weakness that we have seen has nothing to do with current fundamentals. Spreads eased but remained steady as warehouse stocks depleted, in spite of the bags pending approval. No changes were made to the projected production estimates and demand remains high. If anything, the fertilizer situation is a positive factor. The weakness can certainly continue but a major support area of 220.00 seems reasonable. Prices need to rise just a few cents for momentum funds to reverse to buying.