Observations On The Coffee Prices

Who does not like the freshly brewed scent of a coffee in the morning? And who does not think about the prices of the lovely coffee that we drink? I’m not sure that you actually think about the prices after you bought it but we do.

Well, there is much to learn about coffee prices. One thing to know is that the biggest exporter of Coffee is Brazil; therefore the coffee prices have been affected by the fluctuations of the Brazilian Real and the US Dollar in which coffee is traded internationally. A weakness in the Real has a positive effect on higher Brazilian Coffee production and export followed by lower coffee prices in the US dollar. That’s because a weaker real increases the producer’s prices relative to local costs. As a result, a strong Dollar raises the prices in euros which is actually a top importer of coffee but lowers the world coffee prices in US Dollars, according to the International Coffee Organization.

Here a chart which compares the price of the Coffee Futures contract with the rate of the BRL/USD pair in order to have the visual aid:

(Click on image to enlarge)

Looking at this chart we can observe a lately strength on the BRL side of this foreign exchange rate. With different other factors, the price of the coffee got into a balanced behavior and started to trend.

To understand the current price structure from a technical point of view we should take a deeper look into the daily periodicity of the Coffee Futures contract of September called KCU20. We can identify to balance area which is kind of accepted as levels of support and resistance. Currently, the market testing a prior bracket high. Additionally, we can observe an inside day from yesterday’s close. The result of this could be an inside day failure or an inside daybreak pattern on the next day. We could expect an inside day failure pattern for which we need to see some absorption patterns around yesterday’s high.

(Click on image to enlarge)

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This article was originally posted on Medium.

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