COFFEE: Technical Analysis – Uganda lower crop forecast bullish for coffee prices

By IFCMarkets

Uganda lower crop forecast bullish for coffee prices

Lower Uganda coffee export and crop forecast are bullish for coffee prices. Will coffee continue climbing?

Uganda’s coffee exports sank in April at their fastest pace in 18 months, hampered by heavy rains which left only motorcycle taxis able to reach plantations, but also backing ideas of a drop in output. Uganda’s coffee export declined to 333,346 bags of coffee last month from 409,916 bags in March last year, according to the Uganda Coffee Development Authority. The 18.5% decline was the steepest in Africa’s top coffee exporter since September 2016. While the development authority cited transport difficulty as supply was disrupted because of rainy weather, some traders estimate Uganda 2017-18 coffee crop at lower levels than the 2016-17 output the development agency reported at 4.05m bags.

On the daily timeframe the COFFEE: D1 has been retracing following the decline after hitting ten-month low in mid-April. It is testing the 50-day moving average MA(50).

• The Parabolic indicator has formed a buy signal.
• The Donchian channel indicates no trend yet: it is flat.
• The MACD indicator gives a bullish signal: it is below the signal line and the gap is narrowing.
• The Stochastic oscillator is at the edge of the overbought zone.

We expect the bullish momentum will continue after the price closes above the upper bound of the Donchian channel at 120.74. A price point above that level can be used as an entry point for a pending order to buy. The stop loss can be placed below the fractal low at 115.05. After placing the pending order the stop loss is to be moved to the next fractal low following Parabolic signals. Thus, we are changing the profit/loss ratio to the breakeven point. If the price meets the stop loss level (115.05) without reaching the order (120.74), we recommend cancelling the order: the market sustains internal changes which were not taken into account.

Technical Analysis Summary

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