Coffee Review: Rallies On Weak Dollar, Commodity Strength

Arabica coffee futures rallied as traders placed long bets on the commodity sector in the face of a falling U.S. dollar and gains in the key gold and crude oil markets. Most active March coffee gained 275 points to settle at $1.3890 a pound. Nearby December also climbed 275 points to end at $1.3880 a pound.

Market moving news was light so traders focused on the greenback as it carved out new 15-month lows, once again favoring the short-dollar, long-commodity trade. « We saw a lot of flows into commodities as traders got out of the dollar, » one coffee broker said.

In addition, a « Thanksgiving rally » on Wall Street led to gains in the Dow Jones industrial average, which lent support to the commodity markets. A strengthening stock market is positive for commodities since it suggests demand is likely to improve.

Bullish news came in the form of stronger-than-expected consumer spending, consumer sentiment, personal income and new home sales, evidence that the economy, albeit slowly, is recovering from recession, traders said. The markets will be closed Thursday for Thanksgiving and will re-open Friday
morning for an abbreviated trading session.

Technically, March coffee touched a high of $1.3970 a pound, edging past resistance that had been in place near $1.3920 and $1.3945. One broker said it will be interesting to see what happens Friday when the market re-opens to see if March can once again rise above this level. The contract closed off its highs Wednesday and below the key resistance zone.

Source : FutureSource