ICE Coffee Futures (KC) Technical Analysis – December 14, 2016 Forecast

Short-covering and position-squaring continued to boost March ICE Coffee futures on Wednesday. Fundamentally, investors are reacting to the narrowing of the price premium between Arabica and Robusta beans. This could spur an unprecedented switch to premium Arabica Beans from Robusta Beans. This news helped trigger the potentially bullish closing price reversal bottom earlier in the week.

Traders will be watching the Fed’s announcement today also because this will affect the value of the U.S. Dollar. A spike higher in the dollar may put a lid on any rallies in coffee. A spike lower in the dollar could send coffee prices higher.

Technical Analysis

The main trend is down according to the daily swing chart. However, momentum shifted to the upside with the formation of the closing price reversal bottom on Monday and the subsequent follow-through rally on Tuesday.

The market isn’t close to turning the main trend to up, but we could see a follow-through rally into the main Fibonacci level at $146.45. This is a very important level to overcome. If the rally begins to gain traction over this price then look for a possible acceleration into the main 50% level at $152.80.

On the downside, support is the price cluster formed by the June 13 bottom at $138.85 and the new main bottom at $138.75. This level has to hold because the next main bottoms don’t come in until $128.15 and $126.00.

Forecast

Based on the current price at $143.65, the direction of the coffee market today is likely to be determined by trader reaction to $144.00.

A sustained move over $144.00 will signal the presence of buyers. This could generate the upside momentum needed to test a long-term uptrending angle at $145.55. This is followed closely by the main Fib at $145.45. This is the trigger point for a surge into $152.80.

The inability to overcome $144.00 will indicate the presence of sellers. This could lead to a retest of $138.85 to $138.75. If this zone fails as support then look for a break into $135.80.

Watch the price action and read the order flow at $144.00 today. Additionally, watch the movement and direction of the U.S. Dollar. If it breaks sharply after the Fed announcement then coffee prices could rally.