Coffee price: countertrend rebound looking likely
The coffee price decline looks set for a breather, with the short-term picture pointing towards a rebound over the coming weeks.
Could coffee prices turn higher from here?
Coffee prices have been on the slide over the years, with Coffee Arabica losing almost 70% since the $3.089 peak almost eight years ago. More recently we have seen a similar ramp-up in selling pressure, with a 25% decline seen since the October peak of $1.2674. However, we are now seeing signs of a potential rebound for coffee prices, with a bullish retracement phase looking likely to come into play.
The weekly chart below highlights the inherent risk of buying against the trend, with prior periods of upside proving unreliable in terms of size. We have seen some examples of rebounds that have spanned a few weeks, while others last up to a year (2016-2017). Looking at this timeframe, we can see the potential role the stochastic oscillator plays, with the rise through the 20 mark often providing us with a buying opportunity. A fall below the 8080 level has also provided us with great selling opportunities, yet for now it is the rally through 20 that matter. In either case there is a strong chance that we are set to enter a more bullish phase for Coffee Arabica.
Short-term picture highlights reversal story
The four-hour chart highlights the potential bullish shift we are seeing coming into play, with the rally through $0.9606 providing a tentative bullish signal. The rise out of the lower highs that took place last week looks like a precursor to a bullish shift over the coming weeks.
The subsequent pullback into the 76.4% Fibonacci retracement level signals a higher low to add to the bullish story. Given the descending trendline that has been in play, a rally through there would provide greater confidence of an upside move, just as the stochastic rally through 20 would on the weekly timeframe. In either case, it looks likely we will see the price push upwards from here, in what looks like a retracement of the $1.0850-$0.9189 sell-off. As such, we are looking at $1.0215 and $1.0458 as potential upside targets.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Speculate on commodities
Trade commodity futures, as well as 27 commodity markets with no fixed expiries.1
- Wide range of popular and niche metals, energies and softs
- Spreads from 0.3 pts on Spot Gold, 2 pts on Spot Silver and 2.8 pts on Oil
- View continuous charting, backdated for up to five years
1In the case of all DFBs, there is a fixed expiry at some point in the future.
Live prices on most popular markets