Just noticed coffee futures had a solid rally on Thursday. Both arabica and robusta moved up pretty sharply - arabica closed +1.65% and robusta +2.02%. The move caught a lot of people off guard after prices had been getting hammered the past couple weeks.

Turns out the Brazilian real strengthened to a 1.75-year high, which basically discouraged local producers from selling. That short covering in coffee futures pushed prices higher. Makes sense when you think about it - Brazilian exporters hold back supply when their currency gets stronger, so traders covering shorts jumped on the move.

But here's the thing: the fundamentals are still pretty bearish underneath. Brazil's looking at a massive crop this year - up 17.2% to a record 66.2 million bags according to their forecasting agency. Vietnam's been exporting like crazy too, with January shipments up 38.3% year-over-year. That's a lot of supply hitting the market.

Looking at the barchart coffee futures data, you can see arabica had fallen to 6-month lows just days before this rally, and robusta hit 6-month lows too. The recovery in ICE inventories also isn't helping the price picture. So while Thursday's move was nice, I'm not convinced it's the start of something bigger. The supply situation is just too heavy right now. Watching to see if this rally sticks or if we roll over again.