Perhaps what you are about to read is wrong and will be proven false narrative. However, the price of Coffee Arabica moved in an oddly correlated fashion with the price of WTI Crude Oil this past week. The price of Coffee Arabica finished near the 296.76 value. On Tuesday, when the Iranian ceasefire was announced, the price of Coffee Arabica fell to a low of nearly 280.00 USD. Some who may be reading this may sum up the correlation as wrong and for this I cannot blame them.
However, the fear of escalating fuel costs and knock-on affects of potential rising inflation certainly would play into agricultural concerns. Higher costs for fertilizers and logistics, machinery too as a matter of fact, would certainly cause price pressures on Coffee Arabica. Yet, the price of the commodity does remain under 300.00 which can also be viewed as a key barometer of Coffee Arabica. The evidence of the price correlation simply needs a look at a one week Crude Oil chart and that of Coffee.
300.00 Realm in Sight for Coffee Arabica Traders
Yet, those with solid opinions and insights can point to the fact that Coffee Arabica was above 310.00 USD in the later part of March and has come down in value. This is correct, thus if the correlation in Coffee and Crude Oil occurred last week, it may have been based on a simple sentiment shift in near-term conditions, which nervousness and optimism influenced conditions for a limited amount of time. The ability of Coffee Arabica to remain below 300.00 is important.
However, the correlation in early trading tomorrow should be watched for signs of additional influence. The failed peace talks held in Pakistan this weekend will cause broad market nervousness because of a fear of an escalation in the Iranian war once again emerging. Coffee Arabica is a world away in many cases from the conflict in the Middle East, but traders should keep in mind the prospect of volatility developing in all assets and commodities early this coming week.
Supply of Coffee Arabica is Stable
The supply of Coffee Arabica is ample. The price of the commodity remains within a historically higher terrain, but the sideways price action which has developed since the first week of February is still showing signs of strength.
The upwards mobility in Coffee Arabica in the later part of March has been pushed backwards.
Nervous conditions in global markets may have an effect on Coffee Arabica, but with supply steady and production in fields said to be good, the commodity has no real threat except via speculative forces and possible higher energy costs.
And therefore, things in Coffee Arabica may remain tricky this coming week.
Equilibrium of prices has been solid, but technically some traders may feel there are reasons to fear volatility developing – and they cannot be blamed.
Coffee Weekly Outlook:
Speculative price range for Coffee Arabica is 284.00 to 307.00
The past week of price action in Coffee Arabica stood out via technical correlations to risk sentiment in the global markets. The fact that the Iranian war may escalate once again because of the failed peace talks held in Pakistan this weekend is a reason for concern. Perhaps this may create some upside momentum early this week in Coffee Arabica, if the broad markets prove nervous and reactionary.
Traders should be careful and use solid risk management to guard against loud noises coming from afar that may not seem like they should influence prices, but in the short-term may move the sentiment needle. Lower prices in Coffee Arabica have looked like they may carry substance the past few months, but due to the murky outlook of fuel costs near-term concerns may cause some buying action in the Coffee marketplace. The price differential between highs and lows last week remained polite and this may be a good sign for those who think lower prices are in the minds of big players, but anxious global conditions remain problematic.