This week in global finance, the US stock market posted its third consecutive week of gains as retail growth outdid expectations and the Chinese economy reported unexpected growth this quarter. Despite poor performance from major US banks, equities, indices and commodities all managed to trend higher this week. For coffee specifically, the US dollar marked a firm reversal in the trend started last Friday. C market pricing found ample support from speculative buyers and a lack of selling initiative from origin while the USD fell, but today’s recovery in US dollar value served as both an opportunity for speculators to take profit and a selling point for origin suppliers fixing dollar-denominated goods. Stock market participants shaken by Brexit sought refuge in commodities, lending to the sustained rise in C market pricing prior to today’s session. On a fundamental note, the stalemate between the Colombian government and local truckers’ associations continues to stymie the flow of all goods internally and little coffee moved between farms, mills and ports in the last 36 days. Weather in Brazil continues to be warm and dry, with little indication of possible frost. Happy Friday.
C market trended happily upward throughout the week, making the most of USD devaluation and breaking out of the formation diagrammed here last week to make new yearly highs of $1.5480. Today’s brusque reversal minimized those gains to $1.4755, just $0.0070 above the level of resistance. Despite the overall gain in C pricing, this week’s sessions were a near even split, with activity on Tuesday and Friday showing little hesitation to sell into a firmer market and keeping levels in proximity to the $1.4685 barrier. On a weekly chart, the Relative Strength Index (RSI) broke 60 for the third time in three months, nearing into overbought territory without crossing into it, while the Average Direction Index (ADX) finally peeked above 25 to affirm the stamina of the continued move upward.
Despite the week’s strong movement higher, today’s dollar-induced sell-off exposes a measure of weakness in the market. The main reasons for a continued rally are US dollar devaluation and bottlenecked exports in Colombia, and technical factors are taking a backseat as C market pricing closes in on the $1.60/lb 5-year average. The daily chart above indicates an apprehensive and volatile upward trend, with gap at $1.4435 weakening bullish prospects in the short term. The market will need to tread water to stay above $1.4685 or find the will to break through $1.5600 and continue climbing.