Arabica coffee futures on ICE rallied by more than three percent to a two-month high on Thursday, climbing for the sixth straight day on investor short-covering and technical buy signals in heavy volume. Raw sugar on ICE Futures US was steady and cocoa saw its biggest one-day fall in more than two months, falling below the 200-day moving average.
Arabica coffee futures on ICE extended their rise, making higher session lows and higher session highs, a technically bullish signal, for the sixth straight day. The market continued to climb up from a three-year low at $1.3270 per lb on April 29, basis July, pressured by expectations of an abundant off-year crop in Brazil. This, combined with a forecast for cold weather in a high-altitude region of top grower Brazil and a higher benchmark price established by the Brazilian government, spurred investors to cover their short positions.
ICE July arabica coffee closed up 3.75 cent, or 2.6 percent, on technically driven buying at $1.4790 per lb after rising 3.2 percent to $1.4875, the highest since March 5. Total volume soared above 43,000 lots, nearly double the total 250-day average, preliminary Thomson Reuters data showed.
The day's jump pushed July above the 100-day moving average at $1.4588 per lb and then the 23.6 percent Fibonacci retracement level, spurring even more technical buying, dealers said. The market has rallied in the past but given that this is its first break above the 100-day moving average since October, some expect this rally may have more staying power than the others, dealers said. Dealers said the market showed a general lack of concern about Wednesday's frost warning in one coffee zone in top producer Brazil. "Such reports are a reminder that we are around the corner from the frost season," said Andrea Thompson, an analyst with CoffeeNetwork, part of INTL FCStone.
The frost season in Brazil typically starts in early June. July robusta coffee futures on Liffe rose $37, or 1.8 percent, to settle at $2,043 a tonne in turnover of 9,676 lots. July raw sugar futures finished flat at 17.47 cents a lb. Prices are still within sight of a more than 2-1/2-year low of 17.13 cents a lb, touched on April 29, pressured by expectations of a record cane crop in Brazil and bigger-than-expected output in Thailand and India. Favourable crop weather in top exporter Brazil has allowed harvesting in the main centre-south growing region to speed up, weighing on prices.
"It seems we are heading lower sooner rather than later and expect resistance now at 17.50 cents up to 17.60 cents," said Thomas Kujawa of broker Sucden Financial Sugar. August white sugar on Liffe closed down $1.00, or 0.2 percent, at $486.20 a tonne in moderate volume of 7,385 lots.
ICE cocoa futures fell nearly 2 percent, falling below the 100-day moving average with the market consolidating after a prolonged run-up in prices during the last couple of months. Dealers said activity was thin as many players were away for the Ascension Day holiday in Europe and Africa.
ICE July cocoa closed down $42, or 1.8 percent, at $2,349 a tonne. Total open interest continued to soar on May 8 when it hit a record for the seventh straight day at 226,009 contracts, up 1,652 contracts from the previous session, exchange data showed. Liffe July cocoa settled down 16 pounds, or 1 percent, at 1,542 pounds a tonne, in light trade with many traders away for Ascension Day holiday. The contract neared its 100-day moving average at 1,538 pounds.
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