Coffee exports from Vietnam increased in September

Since the beginning of the year, world coffee prices rose by 23% on the background of poor harvest forecasts. Meanwhile, according to the International Coffee Organization, the world exports have not changed significantly due to the realization of stockpiles. Will this lead to the downward correction in prices?

During 11 months of the 2015/16 agricultural season, which started on October 1 of the last year, world coffee exports decreased only by 1% to 102, 75 sacks weighing 60 kg. In addition, world exports of Asian “Robusta” coffee fell by 7, 7% to 37, 43 million sacks, and world exports of Latin American “Arabica” rose by 3, 4% to 65, 33 million sacks. International Coffee Organization provided data until August of the current year. On Thursday, the General Statistics Office of Vietnam, which is the largest producer of “Robusta” coffee, announced about the increase in coffee exports in September to 2 million sacks.

This is 37, 8% more than in the same month of the previous season and exceeds the forecasts of market participants by 20%. The expectations of growth of Vietnamese coffee exports contributed to the decrease in its prices on the world market at the end of September, 2016. In July of this year, Vietnam Coffee and Cocoa Association predicted 20-25% crop reduction in Vietnam because of drought in the current starting season of 2016/17. However, technical analysis indicators provide signals for the further correction and we will consider the option for coffee sale.

Coffee D

On the daily chart Coffee: D1 D1 decreased and reached the support level of the uptrend. The further decline in prices is possible in case its supplies on the world market continue increasing in the beginning of a new agricultural season. Current prices are approximately a quarter higher than the last year’s level, which stimulate producers to sell the stockpiles. In the future, coffee dynamics will be affected by the predictions of new harvest.

Parabolic indicator gives a signalsto sell.
Bollinger bands are narrowing which means lower volatility
RSI is near 50 and has formed negative divergence.
MACD gives bearish signals.

The bearish momentum may develop in case the coffee prices fall below the last fractal low and the support lines of the uptrend: 150. This level may serve as the point of entry. The initial stop-loss may be placed above the last fractal high, which is the maximum for 19 months, Parabolic signal and upper Bollinger bands at 162. Having opened the pending order we shall move the stop to the next fractal high following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 162 without reaching the order at 150, we recommend cancelling the position: the market sustains internal changes which were not taken into account.
Technical Analysis Summary

Position Sell
Sell stop Below 150
Stop loss Above 162