Dubai – Qahwa World
Arabica Futures: Failure Above 300 Triggers Selloff
The July 2026 Arabica contract (KCN26), which remained the most active benchmark during the reporting period, opened the week on a volatile but broadly stable footing. Early trading on Monday saw prices rally from an opening level of 294.60 cents per pound, briefly pushing above the psychologically significant 300 cents per pound threshold. However, the move quickly lost momentum, with the market failing to establish sustained trading above this level.
By Tuesday, modest gains of 1.35 cents per pound were recorded, supported by tightening short-term supply conditions. Market sentiment was further underpinned by export data from Cecafe, which indicated a 10 percent year-on-year decline in Brazilian coffee exports for March 2026, reinforcing concerns over near-term availability.
Wednesday marked the third consecutive session in which the market attempted and failed to sustain levels above 300 cents per pound. The inability to hold above this technical resistance level contributed to a gradual deterioration in sentiment, although the market still closed marginally higher on the day.
The tone shifted decisively on Thursday. Following a strengthening US dollar and a lack of buying interest above the 300 level, Arabica futures broke sharply lower, falling below 290 cents per pound within the first two hours of trading. The market reached an intraday low of 287.10 cents per pound before recovering slightly into the close.
However, selling pressure persisted into Friday, with no meaningful rebound in sentiment. The week concluded with Arabica futures settling at 284.25 cents per pound, marking a clear downside move and a rejection of recent resistance levels.
Currency Markets: Geopolitics Drive Volatility in FX
Foreign exchange markets were heavily influenced by developments surrounding US–Iran relations, with shifting geopolitical signals driving volatility across major currency pairs.
At the start of the week, both GBP/USD and EUR/USD weakened following the breakdown of US–Iran negotiations over the weekend. Sterling opened at 1.34, while the euro began at 1.16, reflecting a broad-based strengthening of the US dollar amid heightened geopolitical uncertainty.
Midweek sentiment improved after reports emerged suggesting that diplomatic discussions between the United States and Iran had resumed. This development supported a recovery in risk appetite, pushing GBP/USD above 1.35 and EUR/USD above 1.18. During this period, the US Dollar Index (DXY) eased to just above 98, reflecting a temporary shift away from safe-haven assets.
However, sentiment reversed again towards the end of the week. Markets reacted to the announcement that the Strait of Hormuz had been fully reopened to commercial shipping for the duration of the ceasefire. The news reduced concerns over supply disruption risks and encouraged a renewed rotation into risk assets.
As a result, the US dollar weakened further, with the DXY falling back below 98, approaching a seven-week low. Currency markets remained sensitive to ongoing geopolitical developments, with volatility expected to persist.
Origin Markets: Climate and Supply Risks Build
Colombia: Weather Disruption Reduces Output Expectations
In Colombia, coffee production is expected to decline compared with both 2024 and 2025 levels. Persistent and excessive rainfall has disrupted key stages of crop development, including flowering, cherry maturation, and bean formation.
Southern growing regions have been particularly affected, with reduced sunlight hours compounding the impact of heavy rainfall. While a natural production correction was anticipated following a strong prior year, current climatic conditions are increasingly viewed as a key downside risk to output.
Vietnam and Indonesia: El Niño Risk Intensifies
In Vietnam and parts of Indonesia, market attention is increasingly focused on the potential development of a stronger El Niño event during the current cycle.
According to the US National Oceanic and Atmospheric Administration (NOAA), there is a 25 percent probability that the ENSO positive phase could reach “super” intensity. Such an event is defined by central-equatorial Pacific sea surface temperatures at least two degrees Celsius above average.
Historically, only three super El Niño events have been recorded in the past 40 years, with the most recent occurring in 2015–2016.
For key coffee-producing regions such as Vietnam and Indonesia, El Niño conditions typically bring drier weather patterns. A stronger event could result in prolonged drought, elevated temperatures, and water stress, all of which would materially impact coffee production.
Vietnam, as the world’s largest producer of Robusta coffee, is particularly exposed to these risks. Any significant reduction in output would likely tighten global supply conditions and could provide upward support to LIFFE Robusta futures.
Conclusion
The coffee market enters the new reporting period with a softer technical outlook for Arabica, heightened sensitivity to macroeconomic and geopolitical developments, and increasing attention on weather-related supply risks across key origin regions. While short-term price action remains driven by dollar strength and risk sentiment, medium-term fundamentals continue to be shaped by production uncertainty in South America and Asia.
