ICE Coffee Futures (KC) Technical Analysis – December 5, 2016 Forecast

March ICE Coffee futures continued to slide on Friday as investors reacted to the news of a potential bumper crop of coffee this growing season. The stronger U.S. Dollar continued to weigh on prices. This is driving down the value of the Brazilian Real which is helping to lead to aggressive farmer selling.

The market finished November sharply lower as new supply and demand figures pointed to higher-than-expected supply in the current season. This has the potential to weigh on prices through 2017.

Current data from the Agriculture Department shows that Arabica coffee production is expected to rise 26% in the season that began July 1 in No. 1 coffee grower Brazil. Last season, Brazil’s exports were the second-highest ever – 36.5 million 60-kilogram bags.

A separate Agriculture report said estimates for this season’s crop in Colombia, the world’s No. 2 Arabica producer, were revised upwards by 5.3% last month. The move was supported by a tree-planting program that reduced the average age of the country’s trees by more than half. Additionally, the National Federation of Coffee Growers of Columbia said the program has also boosted yields by about 50%, sending production surging to the highest level since the early 1990’s.

Technical Analysis

The main trend is down according to the daily swing chart. However, today’s session begins with the market in the window of time for a potentially bullish closing price reversal bottom. This chart pattern will not change the trend to up, but it could trigger the start of a meaningful correction, designed to alleviate the oversold condition.

The main range was formed by the May 4 bottom at $126.00 to the November 8 top at $179.55. Its retracement zone is $152.80 to $146.45. The market is currently trading on the weak side of this zone. This zone is controlling the direction of the market. A sustained move under it will indicate the selling is increasing with potential targets at $141.10, $140.35 and $138.85. The daily chart opens up under this bottom with $126.00 the next major target.

Forecast

Based on Friday’s close at $145.80, the direction of the coffee market today will be determined by trader reaction to the long-term uptrending angle at $144.55.

Holding above $144.55 will indicate the presence of buyers. Overtaking the downtrending angle at $145.55 will indicate the buying is getting stronger. This could generate the upside momentum need to take out the major Fibonacci level at $146.45. This is the trigger point for an acceleration to the upside with the next major target coming in at $152.80.

If $144.55 fails as support then look for an acceleration to the downside. The first three minor targets are $141.10, $140.35 and $138.85. Look out to the downside if these levels fail since the next target angle doesn’t come in until $135.25.

Look for an upside bias to develop today on a sustained move over $146 .45 and a downside bias to develop on a sustained move under $144.55.