Coffee Pullback or Opportunity?The COT report dated May 20, 2025, reveals a gradual cooling of speculative sentiment in the coffee market. Non-commercials (speculative funds and money managers), who had largely fueled the strong rally towards the 420 USX/lb highs, are now closing long positions (–2,599 contracts), though they still maintain a significantly positive net exposure (+43,300 net contracts).
At the same time, commercials (industry operators such as roasters, exporters, and processors) have reduced both their long and short positions. However, the drop in short hedges (–4,103 contracts) is an important signal—it may suggest less need for downside protection at current prices, often an early sign of a potential market bottom.
Total open interest has decreased by 4,406 contracts, signaling a phase of liquidation and consolidation, where traders are reducing exposure rather than initiating new positions.
📌 Fundamental conclusion: The market is undergoing a healthy reset following the Q1 2025 boom, with speculators stepping back and commercials cautiously optimistic.
📈 Seasonal Analysis
Seasonal tendencies align well with the current technical outlook. May is historically a weak month, with negative average returns across most time frames (10y, 15y, 20y).
However, from June—especially July onward, data shows a strong seasonal rebound, with July–August being statistically the best-performing period of the year for coffee. This is partly due to climate-related risks (Brazilian winter, frost risk) and harvest/logistics cycles in key producing regions.
📌 Seasonal conclusion: June may offer a strategic accumulation window ahead of the traditional summer coffee rally.
🧭 Technical Analysis (Daily)
The KC1! daily chart clearly reflects a distribution and correction phase following the early March peak at 420 USX/lb.
Price has broken below the 355–360 demand zone and is currently testing a key support area between 340 and 325, previously established as a demand base during January–February 2025.
The medium-term trend remains bullish, but the market is now in a downward corrective channel, with lower highs and lower lows.
The weekly RSI sits in a low-neutral range—not yet fully oversold, suggesting there may still be room for further downside, though the bulk of the correction may already be priced in.
📌 Technical conclusion: The market is undergoing a deep pullback within a broader uptrend and is approaching potential reversal zones.
🔎 Strategic Outlook
The coffee market is in the midst of a cyclical and technical correction following its sharp Q1 2025 rally. The COT report reflects a rebalancing of speculative positioning, while commercials appear less aggressive on the short side. Seasonality favors a rebound starting June, and the technicals point to a potential long-entry zone around 340–325, attractive for medium-term positioning.
✅ Recommended Trading Setup
Base scenario (medium-term long):
Entry: Between 340 and 325 USX/lb (gradual accumulation)
Stop Loss: Weekly close below 320 (bearish confirmation)
Target 1: 390 (intermediate supply zone)
Target 2: 410–420 (return to highs)
Confluence: RSI support, COT shift, seasonal upside, technical demand zone
Alternative scenario (bearish breakdown):
Only if weekly closes below 320
This would open room toward 300–285 USX/lb
📌 Final Conclusion
While short-term caution is warranted, current conditions offer attractive long re-entry opportunities for those who await confirmation around the 325–340 support area.
The ideal setup would include:
Weekly stabilization with higher lows
Renewed speculative long positioning in COT
Seasonal momentum kicking in from mid-June
