Daily Coffee Market Outlook

NY- Neutral- As expected, the Greenback dominated proceedings yesterday, initially causing a sell-off before weakness in the USD going into the afternoon triggered spec buying and short covering above 133.50. However, from a technical perspective, May failed to close above that key resistance at 133.50 despite breaking through, and this will leave new longs unsure of their strength. We see the potential for more consolidation between 130 and 133.50 today (rather boringly) but keep our eyes northward in case of a further push toward 137/138. USD weakness following ex EU commissioner Prodi's comment that Greeces' financial crisis is over and the rest of the region is safe' may have an impact early on but more likely will be discounted as 'noise'.

Liffe- Sell (1)- Initial weakness yesterday turned into strength as rumours began to circulate that the Vietnam coffee association might be serious about its coffee stockpiling plan. Shorts scrambled for cover as specs tried to capitalise on the upswing sending May up $23. Although stemming the recent slide, we don't see yesterdays uptick as having any sizeable ramifications or marking a turnaround in sentiment, and look for a resumption in selling. May will need to break 1300 in order to stem the recent trend and this will require further USD weakness. 1200 is our downside target in the short to medium term.