ICE Coffee Futures (KC) Technical Analysis – December 12, 2016 Forecast

The stronger U.S. Dollar continued to drive March ICE Coffee prices lower on Friday, but there is some good news. The slope of the current sell-off is beginning to flatten which suggests a loss of downside momentum. Since the market topped on November 8, the market has been falling at a pace of about $2.00 per day. However, the last three days of the week shows the sellers may be lightening up on their pressure.

Fundamentally, comments from Robobank suggest the market may be nearing a bottom or at least the intense selling pressure may be close to letting up. Robobank said futures will trade “between 132 – 135 cents per pound in the next couple of month,” noting that the “impressive” drop in Arabica prices had cut their premium to London Robusta futures to some 50 cents a pound, “which is what the fundamentals would suggest”.

Robobank also said that Arabica prices may also “see some support from demand”, which had, to judge by available trade and stock statistics, proved “impressive” in the July-to-September period.

Technical Analysis

The main trend is down according to the daily swing chart. The trend is far from turning up, but the market is in the window of time for a potentially bullish closing price reversal bottom. This could trigger a short-covering rally.

On the upside, the nearest resistance is an old bottom at $140.25. The nearest support is the June 13 bottom at $138.85. The daily chart opens up to the downside under this level because the next two main bottoms don’t come in until $128.15 and $126.00.

Forecast

Based on Friday’s close at $139.35, the direction of the coffee market today is going to be determined by trader reaction to the June 13 bottom at $138.85.

A sustained move under $138.85 will signal the presence of sellers. Taking out this level could trigger an acceleration into the price cluster at $135.65 to $135.50. This is another trigger point for an even steeper break with the next major target the June 1 bottom at $128.15.

A sustained move over $138.85 will indicate the presence of buyers. The first upside target is $140.25. This is the trigger point for an acceleration into $145.25 to $145.45.

I’ll start getting excited about the upside potential of the market once buyers overcome the main Fibonacci level at $146.45.

Watch the price action and read the order flow at $138.85 today. Trader reaction to this level will set the tone for the day.