COFFEE Analysis – Colombia higher crop bearish for coffee prices

November 29, 2018

By IFCMarkets

Colombia higher crop bearish for coffee prices

Colombia coffee production rose in October while Uganda’s exports fell. Will coffee prices continue declining?

Uganda’s coffee exports fell 8.1% in October 2018, the first month of the new 2018/19 season, over the same month last year to 350,743 60-kg bags, according to the state-run Uganda Coffee Development Authority (UCDA). Lower coffee exports indicate weaker coffee demand. Two weeks before the UCDA report data from Colombia’s National Federation of Coffee Growers showed Colombia’s coffee production in October rose 1.2% to 1.086 million 60-kg bags from 1.073 mln in the same month last year. Colombia is the world’s third top producer of coffee, and Uganda is the eighth biggest producer. Rising supply with weaker demand are bearish for coffee prices.

Coffee price falls below MA(200) Technical Analysis IFC Markets chart

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On the daily timeframe the COFFEE: D1 has been retracing following the decline after hitting ten-month high in mid-October.

  • The Parabolic indicator gives a sell signal.
  • The Donchian channel indicates no trend yet: it is flat.
  • The MACD indicator gives a neutral signal: it is below the signal line and the gap is steady.
  • The RSI indicator is falling but has not breached into oversold the zone.

We believe the bearish momentum will continue after the price breaches below the lower boundary of Donchian channel at 109.73. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed above the upper Donchian channel at 116.70. After placing the order, the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop loss level (116.70) without reaching the order (109.73), we recommend cancelling the order: the market has undergone internal changes which were not taken into account.

Technical Analysis Summary

Position Sell
Sell stop Below 109.73
Stop loss Above 116.70

Market Analysis provided by IFCMarkets