Daily Coffee Market Outlook

NY- Sell (3)- Inevitably, currency movements were the main driver of the 'C' and commodity markets in general. USD strength in the morning led to a lower 'C', followed by afternoon weakness in the USD culminating in a higher NY. The pattern looks set to continue today in terms of currency 'domination', albeit to the upside in the dollar and downside in NY. This follows last nights decision by the Fed to increase the overnight deposit rate by 0.25% to 0.75%, sending an explicit signal to the market that the emergency supply of liquidity to the markets is done and the aggressive monetary easing cycle looks set to reverse. Historically, the discount rate has been used as a psychological tool in sending signals to the market of future monetary policy direction; and it was something the market has been warned about recently by Bernanke but the shock was in the timing- sooner rather than later. Inevitably, the greenback reacted positively against the main basket of currencies sending the EUR/USD to recent lows. In light of this, we see the only way as down for NY today and remain bearish. Levels to watch on the downside are 130, 128.5 and 123. To the upside, 135 looks to be strong resistance in March.

Liffe- Sell (1)- More of the same for LDN as the USD coordinated proceedings Flow was rather limited in the outrights with most volume arising from the switch. Sentiment appears to be to the downside still as even USD weakness into the afternoon couldnt lift the board much higher than unchanged and origin sellers remained like a cloud over LDN. Following the cut in the discount rate, we retain our bearish stance and see more weakness resulting in the short term. Levels to watch remain 1280, 1300 and 1315 to the upside. Support lies at 1250.