Daily Coffee Market Outlook

NY- Neutral- Following the festive break, Mondays rally appeared to take traders by surprise as shorts scrambled to cover and funds continued their average buying. Yesterday came as a disappointment then as ICE 'C' failed to continue the rally and stalled at the top of Mondays' intraday range, drifting back to close almost 1 cent lower. The dollar will likely be a key driver of the market looking forward to the next week or two in setting a tone for the commodities markets as a whole. Its weakness on Monday, coupled with higher oil driven by the cold snap accross the USA and Europe looks like it will be a temporary phenomenon; most commentators now are calling for further gains in the Greenback as the balance of power shifts to the US and yield considerations come into play. With this in mind then, we feel Mondays rally may have just been a flash in the pan. Resistance looks fairly strong at the 50% fib retracement (142.65) coupled with the 20 day moving average (142.50). In the short term then (at least until non-farm unemployment numbers on Friday), we see March capped at resistance while maintaining a tight range between here and support at the 139 area.

Liffe- Neutral- Ldn struggled yesterday alongside NY as the market lacked momentum to capitalise on Mondays' gains. Disappointingly, March failed to close above the 20 day moving average at 1365 to give traders the impetus for an assault of key resistance at 1380. Without a close above the latter stability hurdle, the downward pattern looks set to continue. 1315 followed by 1295 are the next support levels. Resistance, as mentioned, resides at 1365, 1380 and more crucially, 1425.