Coffee melts down and tests 110 cents on ICE U.S.



Coffee has been melting down on ICE Futures U.S. The adjustment in the funds’ portfolio, due to rain in Brazil and the proximity of the new business cycle in Colombia and Central America, which started the negative reversal, has gained intensity over the week. Now the market has detached from the fundamental reality and sinks into the negative field amid the global risk aversion movement, which sends the dollar higher and weighs against commodities. Coffee is very vulnerable to negative pressure due to the inversion of the fund’s stance and more favorable signs from fundamentals.

Thus, the December/20 position had losses for the eighth session in a row. The last close with gains was on September 11, at 132.35 cents. Since then, it has accumulated losses of 16.6%, and now coffee is testing the level of 110 cents. The scope of the lows frightens both sellers and buyers and ends up taking liquidity from movements.

The market shows signs of being oversold. Therefore, it may seek some slowdown, but remaining vulnerable to volatility in the global financial market, which is undergoing a new realignment amid fears about new cases of COVID-19 and less optimism about a stronger resumption of activity. The ‘V’ shape is being replaced by other letters or geographic forms. From the coffee point of view, it is important to keep an eye on the CFTC’s report on the position of funds, to be released next Friday. The last one still indicated a strong net long position of funds.