Coffee Is The Bullish Highlight In Turbulent Week

The Chinese economy grew in the first quarter of 2013 at an annualized rate of 7/7 %. It is the first time in more than two decades that this index comes in lower than 8 %.

This piece of information was used by investors to undo their positions in commodities, which was also influenced by the margin calls in a gold market that accumulated its heaviest losses since 1980. Just to register, silver at one point fell 13% in a given moment last Monday!

The bomb explosions at the Boston Marathon, a sad event that dominated the news, generated discomfort to the investors, who ran toward U.S. bonds thinking a new wave of terrorist attacks could come.

Focusing on the macro scenario, the IMF reduced once more its expectations for global growth, keeping the prognosis of recession for the euro zone.

The main stock indexes in general fell on average 2%, near the same level of losses of the commodities indexes. The constant drop of raw material prices has made some to point to a deflationary scenario, even with a lot of money being injected by the central banks.

Oblivious to all negativity, coffee had a week with strong gains in NY, with an increase of $8 per bag and the spreads narrowing strongly due to the funds positioning. London was firm as well, showing a resiliency that helps the technical picture and the producers who pace their sales.

With the price increases from Thursday on, the physical market traded with more volume and bigger lots in Brazil. Not even with the weaker real, or better, a stronger dollar, were the gains prevented. The partial covering of the enormous short position of the funds encountered a good selling volume of origins in the futures market, which should continue in case prices go up further.

Estimates of Brazilian companies point that 75 % of the current crop has been commercialized already, at the same time that in Vietnam it is believed that the producers are holding 10 million bags in inventory. In India, there is a “retention” of sorts on the part of exporters and producers, according to a well-respected trading company.

The differentials have not changed much, maybe in function of the market not changing the price intervals a lot.

The funds still have enough ammunition to cause more highs since they were ate one point equivalent to almost 20 million bags sold, a position that it is still a winner and that with uncertainty is making some traders to realize some profit.

Some are talking already about an increase of the minimum price in Brazil, which should be the first step of a program with different options that withdrawals coffee from the market and in that case could cause a more expressive rally in the terminal markets.

The technical picture points to the $147.20 cents per pound as the next level, while the bears root for a new closing below $140 cents to make the bulls to stop buying.

Have a good week.