No Soft Landing For Cotton Prices This Year?
Today’s Spotlight Market
The most recent Commitment of Traders report shows large and small speculators moving in opposite directions the past week, with non-commercial traders shedding over 6,600 contracts off of their net-long position during the reporting period ending June 2. Non-reportable traders were adding to their overall bullish position by adding over 1,000 net-long positions during the same time frame. Commercial traders remain net-short Cotton but reduced the overall position by nearly 5,600 contracts last week.
Fundamentals
Cotton bulls cannot seem to catch a break in 2015 as the market seems determined to cap any rally attempts, even as prices hover near 6 year lows. The USDA supply/demand report released on Wednesday showed little change in both global production totals as well as U.S. Cotton inventories despite what appears to be U.S. Old Crop Cotton exports surpassing USDA expectations.
What appears to be weighing on Cotton prices is the legitimate concern that China will continue to release Cotton inventories from state-held reserves, which will help to lower the import demand from Chinese end-users. China is believed to hold just over half of the current global old-crop Cotton inventory so exerts an outsized influence on the global market.
As we move further into the new-crop season, traders will be keen to watch for production estimates out of both India and the U.S. as weather conditions will determine if these two leading Cotton exporting nations produce a bumper crop or fall short of expectations and help to tighten global inventories heading into 2016.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for new-crop December Cotton, we notice prices becoming choppy as the market has entered a period of range-bound trading following a nearly 6-month long rally from its 2015 lows made back in late January. The prospects of an upside breakout following the USDA report was dashed on Thursday, as a sharply lower close following a move to 2-week highs helped to reduce the bullish enthusiasm among short-term traders. The 14-day RSI is neutral, with a current reading of 50.76. 63.03 remains the next major chart support level for the December contract, with resistance seen at 66.59.?
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