BLUE LINE = BRLUSD

The market dropped on the first day of the COT report and rallied on the last two days, making a high of 226.45 on the last day. The market showed both weakness and strength on the days following the report as it made lower highs each day as the week progressed. The changes in the reports for both KC and RC show buying by commercial and spec selling, namely managed money, including Index, and small traders. This activity is only half of the picture as I’m sure there were reversals by the end of the week. Also note on the report the high concentration of the RC trade positions in options. Although I don’t get the negative positions for the rest of the sectors.

The market continues to show atrophy as volume diminishes and as prices move with little effort. Spreads have lost dominance in the market which indicates several factors. Both origin and the consumer sector are absent in the forwards. With such discounts in the forward months, one would think that consumers would be buying but it isn’t so. Also, if anyone had available coffee, or was willing to part with it, they could borrow dollars, that is, sell physical coffee, or Z, and buy forwards, and borrow while receiving money. But, apparently, there are factors that I am not aware of.

The behavior of the market, such as it is, shows weakness. Equities are dropping as are other commodities while the Real drops, (it continued to drop after the close). Of course, the ultimate culprit is the strength of the dollar, or the higher interest rates imposed by the Fed. Yet, among all the markets impacted, coffee was the least affected. As to fundamentals, Safras lowered their production estimates as did Rabobank. Exports seem to be lower but we don’t know if hindered shipments or impacted crop are responsible. Monday should continue with momentum funds buying and trade selling.