Quarterly Outlook
Q4 Outlook for Investors: Diversify like it’s 2025 – don’t fall for déjà vu
Jacob Falkencrone
Global Head of Investment Strategy
You can access both of our platforms from a single Saxo account.
Arabica coffee prices pause after major rally
Ole Hansen
Head of Commodity Strategy
Summary: Arabica coffee prices soared by nearly 33% over the course of the past month, but the rally has now paused after hedge funds cut their record short position in half.
Arabica coffee (KCZ8 or COFFEENYDEC18) has paused after rallying by close to one-third during the past month. Renewed BRL strength before and after the first round of the Brazilian election on October 7 was the event that helped trigger a major squeeze.
In the weeks and months up until this event, hedge funds had been accumulating a record and ultimately unsustainable short position. Hedge funds will continue to sell into weakness – or buy into strength – until the technical and/or fundamental picture changes. In this case, it was primarily a change in the technical outlook that created the mad rush towards the exit.
During a four-week period up until October 16 hedge funds cut their net-short in half. With that, the need to continue buying has been reduced, at least as long a renewed upside push above $1.26/lb is avoided.
In the weeks and months up until this event, hedge funds had been accumulating a record and ultimately unsustainable short position. Hedge funds will continue to sell into weakness – or buy into strength – until the technical and/or fundamental picture changes. In this case, it was primarily a change in the technical outlook that created the mad rush towards the exit.
During a four-week period up until October 16 hedge funds cut their net-short in half. With that, the need to continue buying has been reduced, at least as long a renewed upside push above $1.26/lb is avoided.
As mentioned in a previous update, the first major level of resistance was $1.26/lb, the 38.2% retracement of the 2016-2018 sell-off. Having found resistance at this level, the market is now consolidating with focus on BRL and the second round of the Brazilian presidential election on October 28. In order for the bullish sentiment to be maintained, coffee needs to find support ahead of $1.14/lb, something it has so far managed to do.
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Q4 Outlook for Traders: The Fed is back in easing mode. Is this time different?
John J. Hardy
Global Head of Macro Strategy
The Fed launched a new easing cycle in late Q3. Will this cycle now play out like 2000 or 2007? -
Quarterly Outlook
Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally
Jacob Falkencrone
Global Head of Investment Strategy
-
Quarterly Outlook
Q3 Macro Outlook: Less chaos, and hopefully a bit more clarity
John J. Hardy
Global Head of Macro Strategy
After the chaos of Q2, the quarter ahead should get a bit more clarity on how Trump 2.0 is impacting... -
Quarterly Outlook
Upending the global order at blinding speed
John J. Hardy
Global Head of Macro Strategy
We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ... -
Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
-
Quarterly Outlook
Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever
Jacob Falkencrone
Global Head of Investment Strategy
-
Quarterly Outlook
Commodity Outlook: Commodities rally despite global uncertainty
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Macro Strategy
-
Quarterly Outlook
Equity Outlook: The ride just got rougher
Charu Chanana
Chief Investment Strategist