This week in global finance, US stocks posted the largest loss since June and all major indices declined to their lowest level in months on news of North Korea’s nuclear weapons test and further commentary from Federal Reserve officials indicating the possibility of a second US interest rate hike. The US dollar marked a firm recovery today as speculators increased their long positions ahead of this month’s Federal Reserve talks, forcing the commodities to trade lower with oil dropping from $50/bbl to $48/bbl at the end of the session. In coffee fundamentals, Brazil’s flowering and weather are at the center of conversation as the industry considers the potential impact on output by the four slight frosts this winter and the early timing of flowering. C market pricing ended its 9-day upward streak by stalling out yesterday and dropping 4 cents today. Happy Friday.

From a technical perspective, the market appears to be re-forming a new head-and-shoulders configuration with the first shoulder at $1.4725 and the head at $1.5510, the same level as the head in the last configuration (click here to see first analysis). If the US dollar continues firm, the market may be forced downward to $1.4535 again, with room to test as low as $1.3775, and then recover to form the second shoulder of the configuration. The daily chart below is helpful in examining this possibility.


An alternate interpretation of the chart is possible if there is further news of damaged production in Brazil. In the short term, the market would need to retest the $1.5510 barrier and could consolidate between $1.50 and $1.55. In the mid-range, today’s trading marks the fourth consecutive week of gains and a continuation of the rising trend channel. While there is room for the market to backtrack, pricing appears loath to return below $1.42.