Daily Coffee Market Outlook

NY- Neutral- Momentum appears to have disappeared from the market as we approach year end, with the major players and short-term specs looking decidedly absent from the market. Looking at the Arabica market fundamentals, Fortis's Agricommodities monthly report points towards a 10mio bag surplus in 2009/2010. However, amid the backdrop of heavy rainfall in Brazil creating uncertainty and erratic flowering, this surplus has not weighed on the market yet. Alas, expectations amongst all the major banks is for prices to reach 170 in their 2010 forecasts, and so it will be interesting to see how the situation develops in the long term. At present, the market is following macro-economic developments extremely closely, and any equity market rally/drop is shadowed closely by ICE 'C'. The dollar has also played its part, albeit, in the last week or so, its' dramatic resurgence has had a relatively small impact on ICE as short term specs shut-up shop for the holidays. Today, we see little chance of fireworks, and look for only small moves in either direction if they do indeed develop. Support comes in now at 144 (weak) then 140. Commentators suggest that March will need a sustained bout of settlement below 144-140 to encourage longs to exit. To the upside, resistance lies at 148.

Liffe- Sell (1)- Ldn has come under pressure the last week or so as it follows developments with the greenback. Drier weather in Vietnam has added weight to this downward momentum and March hangs tentatively above key support at 1340. Despite declining volume and trader participation, this downward trend looks set to continue, and any settlement below 1340 could induce a further wave of selling as longs look to liquidate going into year end. Amid this backdrop, barring any steep declines in the dollar over the next couple of sessions, we must turn our outlook Southwards and look for further losses. Support then lies at 1340; below here there is very little in the way of technical support to halt the decline. To the upside, March needs a strong close or challenge of 1425 resistance to unsurp the bears that begin to smell blood.

Daily Coffee Market Outlook

NY- Neutral- Despite fundamental data released on Saturday indicating that 2009/2010 crop estimates will be revised down, the market looks set to follow the dollar and any macro-economic data released in the US. Sock market indices and consumer confidence have been driving the market for the last few months and this phenomenon looks set to continue. Overnight, Asian equity indices all posted gains, and early European trading has continued this positive theme. Bearing in mind that daily sentiment can change in a heartbeat, we choose to remain neutral today as the festive season reduces market interest further, and noting that dollar moves in either direction will take ICE 'c' with it. Support in March lies at 140 while resistance remains at 148.

Liffe- Neutral- March encountered further losses on Friday as the dollar resurgence continued. This has brought the key 1340 support level into play and opens the possibility for a challenge to the 2009 lows if enough market interest can be mustered to sniff out stops to the downside. Sharp moves characterised the LIFFE market over the summer as soon as short term specs 'smelled blood' and the potential to profit from high or low-ticking. We remain sceptical that traders will be around in large enough numbers to move this festive market but the possibility is always there. We choose to remain neutral today and look to the dollar and stock markets for inspiration. Support lies at 1340 while resistance can be found first at 1390 and then at 1425.

Daily Coffee Market Outlook

NY- Neutral- Dollar strength has been the theme this week as the greenback gains against all the majors. Interestingly, this has come despite the FOMC pledging to keep rates low for an extended period (the market believing the contrary after unemployment data) and was the whole basis for the rally in the first place. This ties nicely with views expressed last week; in this market, the trend is your friend- traders first bought dollars as a yield play, they then hoarded dollars as a risk play, despite more positive than negative data appearing this week. Amid such a backdrop, ICE 'C' has held on to its gains remarkably well. However, if the dollar continues to strengthen into year end as Investment Houses balance their books (which we expect), then a steeper fall in NY could be yet to come. We choose to remain neutral today for lack of volume and real interest in this festive market. However, the greenback should be monitored for clues as to the markets next direction on an intra-day basis. Support remains at 138-140 while resistance can be found once more at 148 in March.

Liffe- Neutral- Severe lack of interest accross the board sums the weeks trading up nicely. However, March still came off $20 dollars yesterday on the back of the strong dollar as traders liquidated longs and stepped to the sidelines going into year end. As the greenback rebalances, the risks for Mar LIFFE appear to the downside; 1380 could provide the trigger were it to be breached, bringing key support at $1340 into play. With so many stops expected below here, amid thin trading, the downside reaction could be severe. We choose to remain neutral today, but with eyes to the South. Support remains at 1380 and crucially at 1340. To the upside, supply can be found at 1425.

Daily Coffee Market Outlook

NY- Sell (1)- Yesterdays session focussed on the FED rate decision and accompanying statement at 19.15 GMT. The grennback remained on the back foot throughout the day but flow was light accross ICE 'C' and and the market struggled to build on Tuesdays gains. As expected, rates were kept unchanged and the FED rate setting committee indicated that rates would remain at historically low levels for the next year or so. Most notable perhaps was Bernanke's statement regarding emergency funding and the plan to withdraw it as planned in Feb due to improvements in the economy. Overnight, the landscape changed once more as Greece was downgraded prompting traders to pile into the dollar/yen once more as a risk play. It seems then, as Spain and the UK emerge in the distance as possible victims to a downgrade, that the greenback rally is not over yet. All this should keep ICE 'C' capped for the time being. As such, we are sellers today and look for challenges of weak support at the 146 area.

Liffe- Sell (1)- LDN has relly failed to join the party in the last week or so as the market slows for the festive season. Unlike NY, gains have been modest and flows extremely light. Even the FOMC meeting failed to set the world on fire. Despite this, with the dollar on a tear, we see the potential for a slide in LDN but expect flows to be light. March will be capped by resistance (still) at 1425. To the downside, support lies at 1392 and 1340 (critical).

Daily Coffee Market Outlook

NY- Buy (1)- Ice 'C' managed a strong rally accross the board yesterday breaking through key resistance at 146.5 and 148 in March to settle at 148.20. This came despite losses on all of the major equity indices and a resurgent dollar. We expect much of the same today pending the interest rate announcement tonight from the FED. Bernanke and his cronies look likely to say growth is accelerating while repeating the pledge to keep the target rate for overnight bank loans near zero for an 'extended period'. In terms of coffee and all growth sensitive assets, another year of low rates should underscore the market and maintain prices on an upward trajectory. As such, we remain buyers of NY; we begin to enter somewhat uncharted territory resistane wise now so expect supply to come in around 152. To the downside, support can be found at 146.5 and 140.

Liffe- Buy (1)- March was capped by resistance yesterday at 1425, the December high posted on two separate occasions this month. However, bulls were unable to hold on to these gains and the market swiftly retreated to around the 1400 level. We see potential for further gains today, albeit in slightly less dramatic fashion; stops appeared to have been cleared in NY which dragged LDN with it, and volume will indeed be light as we move closer to Christmas. Resistance then stays at 1425 with little else above here before 1515. To the downside, support can be found at 1392 (weak) and 1340 (critical). With momentum now firmly to the upside, not even a dramatic dollar correction is likely to send March down to its' 09 lows before year end.

Daily Coffee Market Outlook

NY- Neutral- Commodities rallied accross the board yesterday as the market breathed a cumulative sigh of relief over the Abu Dhabi Dubai World debt refinancing agreement. ICE 'C' March managed to rally 3.25 cents as equities climbed and the recent dollar rally was halted. However, March was capped at 146.60, the first resistance hurdle, and settled at 145.90. With this in mind, March sits uneasily, and there is potential for some sort of pullback as the market takes stock. Today sees the release of US PPI and Industrial Production data, both of which can shed more light on the state of the economy since the improved job-market figures at the beginning of December. With the dollar reverting to 'pre-crisis mode', following yield developments as opposed to getting sold on better economic data, trading the data is tricky. No-one can quite be sure of how the market will view the dollar if the numbers are indeed better; as the relationship breaks down then, better data may indeed result in dollar appreciation and commodities getting SOLD. As such, we choose to stand on the sidelines today and watch developments unfold. Resistance remains at 146.5, followed by 148.5. To the downside, support can be found way down at 140-138, 135 and crucially, 133.

LDN- Neutral- Volume was very low on LIFFE Robusta yesterday as the market winds down for the festive season. The resulting range was tight in March with the majority of flow arising from the Jan/Mar switch. Although the market benefitted from early dollar weakness on the Dubai World story, lack of volume (and trader interest) meant that there was no real momentum behind the move and March was only able to post an $8 gain on settlement. Despite some juicy macro data from the States, we expect much of the same today and thus choose to remain neutral. Weak support in March now lies at 1392 followed by 1355 and crucially 1340. To the upside, resistance can be found at 1425.

Daily Coffee Market Outlook

NY- Buy (1)- Abu Dhabi provided $10 million to help Dubai World, the state owned holding company, meet its obligations last night. Dubai shares surged the most in 14 months on the news and Asian and US futures rebounded on optimism that the Emirates' debt problems wont spread to other emerging markets. The Greenback gave back some of last weeks gains overnight as traders repositioned themselves for the ensuing 'risk rally'. As such, we retain our bullish stance today and look for modest gains accross ICE 'C'. With no specific coffee news released over the weekend and no macro data (of note) due for release today, the festive markets and associated light trading are likely to shift into first gear. The dollar will dictate todays flow and should be watched for any hint of re-balancing as we near year end. Support in NY remains around the 138/140 zone, followed by 135 and crucially 133. To the upside, resistance can be found at 146.5 and 148.

Liffe- Buy (1)- Focus begins to shift towards the March contract now as we approach year end and January nears first notice day. Flow has been light across the board the last few sessions and volumes should fall yet further as the Festive seasons kicks in. The majority of trades will focus on the Jan/Mar, Mar/May switches as traders look to rebalance books and shift positions down the board. With little in the way of macro data, coupled with Christmas markets, the dollar looks to lead the way. In Jan, 1360 remains the demand zone and should provide support above 1295. To the upside, 1400/10 should keep the market capped for now.