20000216CSCE coffee falls further in technical move

NEW YORK: CSCE coffee futures tumbled Monday to settle at their lowest level since end-October 1999, coming under pressure from a bearish Commitments of Traders report and tidying up of positions ahead of first notice day, traders and analysts said.

Front months lost 3.80 cents, with spot March arabica closing at 105 cents a lb after trading 107.60-104.25 cents. Active May ended at 107.75 cents, and the rest shed 3.20 to 3.75 cents.

Arabicas gapped lower at the open in reaction to the latest Commitments of Traders report, which showed a smaller than expected decrease in the large speculators' net long position. Speculative and origin selling also put pressure on prices, which combined with the relative lack of roaster support, pushed spot March to test key support.

Traders said transactions were dominated by switch activity ahead of Friday's first notice day in the front month.

Open interest in spot March declined by 3,420 lots to 15,961 as of Feb 11 while it increased by 1,459 to 21,907 lots in active May delivery.

The latest CFTC report showed non-commercials, or funds with a net long position of 5,633 lots as of Feb 8 against 7,566 in the previous report.

Traders said before the data were released they were expecting a net long position of around 3,000 to 4,000 lots.

Non-reportables were also net long 2,125 lots, whilst commercials remained net short in the market at 7,758 lots.

Market operators will also be looking to the publication on Tuesday of Green Coffee Association's monthly stock data.

Traders and brokers contacted by Reuters have called for an increase in warehouse stocks of 300,000-500,000 60-kg bags, although most believe this rise has already been factored into prices.

"I'm expecting downside potential of another four to six cents. But I think we're going to hold at a dollar support level," one senior buyer said.

But Ann Prendergast, softs analyst with Refco Inc. said that she would be surprised to see the market fall to these levels, citing a low around 103-104 cents a lb.

"It could (fall to a dollar), but honestly I think that's just a little bit overdone. If it does go to a dollar it's going to bounce right off," she added.

Technicians said support for May arabica stood at 107.25 cents, then 104 cents, with resistance likely at 113 cents, then 115 cents.

"The path of least resistance remains down...we would want to see May futures trade through the $1.20 level to become more convinced of the market's near-term upside potential," softs analyst with Prudential Securities Arthur Stevenson said.

Volume was an estimated 14,686 lots, against the previous official volume of 12,175 lots. Call volume reached an estimated 2,081 lots and puts had changeover of 1,066 lots.

The nine-day relative strength index (RSI) of May coffee stood at 17 at the close on Monday, compared to 32 on Friday.

Technicians normally believe an RSI reading of 30 or less is an indication that the market is oversold, while 70 or more is usually a sign it is overbought on a short-term basis.-Reuters