Our coffee price forecast is close to be invalidated. The signs of a very aggressive coffee (COFFEE) price rally in 2019 are fading. The price of coffee has to recover in the next 6 weeks, before the monthly closing of May 2019, in order to avoid a giant breakdown. It’s only way to still be a candidate for one of the top 3 investing opportunities of 2019 and meet our bullish coffee price forecast of $2. The coffee price chart shows the giant breakdown risk.
Let’s first revisit what we wrote 3 months ago when we published our coffee price forecast.
We believe that 2 USD might be a reasonable price target for our coffee price forecast 2019. Note this is NOT an average price for 2019, it is more of a peak we expect.
The condition before we can get all in is a combination of a sustained breakout above $1.17 combined with a strengthening Brazilian Real. In such a scenario we believe the picture in the COT report will shift “back to normal”.
The Brazilian Real has gone nowhere basically. At the time of writing it was trading at an exchange rate of 3.69 against the USD, right now it is 3.88. No coincidence that the coffee price fell since then as it is strongly correlated with the Brazilian Real.
We need to see a strong rise in the Brazilian Real, or a strong decline in the USDBRL pair, for the price of coffee to become bullish.
This also underpins our intermarket. As per our 100 tips for successful investing:
When leading assets arrive at decision levels they can do either of two things. Either they break out / break down or bounce back. In doing so, they influence other assets. This is the basis for a new market trend where several markets are part of a similar type of trend.
This means that it is one and the same thing to invest in the USDBRL currency pair or coffee price.
When it comes to the coffee price chart this is what we wrote in January: “A giant triangle pattern will resolve in 2019, without any doubt!”
Since then, the price of coffee started a breakdown after moving to its apex. After 1 monthly close below the breakdown level coffee will either recover before the end of May OR will confirm its breakdown by then.
The coming 6 weeks will be crucial for the coffee price.