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Cotton saw further mild erosion overnight despite a lower dollar. In recent days, the dollar has had a general effect on the market, with cotton remaining near its lows for the year while the dollar still sits near its recent highs. Economic data may be having an overriding effect on cotton with this week’s Initial Jobless claims rising by more than expected. This follows weaker than expected jobs numbers for December and disappointing retail sales data that corroborate the neutral to negative near term US outlook for consumer demand. Export sales have balanced this out in recent weeks and months as buying by China has put the pace of US export sales in cotton slightly ahead of the 5-year average of 59.1% of the USDA’s export projection for this point in the marketing year. The latest export sales data are due out this morning and traders are looking for another total in excess of the 132,300 average needed each week to reach the USDA’s projection. Cotton is also supported over the long term by the need to recapture acreage lost to soybeans and other crops in the US in recent years. If cotton prices fall too far or if soybean prices stabilize, cotton may fail to gain the 1 1/2 to 2 million acres that some feel are needed in 2009/10. Still, the US economic outlook may continue to outweigh these long term supportive factors for now, especially if the dollar remains near the 2010 highs or moves higher. Commercials and funds were moderate buyers yesterday. Support also came from China’s announcement that its 4th Quarter growth hit 10.7%, up substantially from the 3rd Quarter. A big soybean sale to China was also announced yesterday morning which suggests that China continues to be a big buyer in commodities despite recent actions to restrict lending. Open interest fell by over 3000 contracts in cotton on Wednesday, and stocks registered for delivery against the ICE No 2 cotton contract increased to 437,781 running bales today from the previous day’s total of 433,303 running bales.
TODAY’S GUIDANCE: Cotton fell by 6.00 cents from the first trading day of 2010 through the middle of this week and that has brought a pause in the selling. However, there is still more room to go on the downside. Look for the March contract to push below the 100-day moving average. Light support is at 70.52 in the March contract with next support 69.75 and 67.88. Resistance remains at 72.43 and then 73.35.
Cotton Market Commentary – 2010.01.22
by Terry Roggensack on January 22, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
Cotton saw further mild erosion overnight despite a lower dollar. In recent days, the dollar has had a general effect on the market, with cotton remaining near its lows for the year while the dollar still sits near its recent highs. Economic data may be having an overriding effect on cotton with this week’s Initial Jobless claims rising by more than expected. This follows weaker than expected jobs numbers for December and disappointing retail sales data that corroborate the neutral to negative near term US outlook for consumer demand. Export sales have balanced this out in recent weeks and months as buying by China has put the pace of US export sales in cotton slightly ahead of the 5-year average of 59.1% of the USDA’s export projection for this point in the marketing year. The latest export sales data are due out this morning and traders are looking for another total in excess of the 132,300 average needed each week to reach the USDA’s projection. Cotton is also supported over the long term by the need to recapture acreage lost to soybeans and other crops in the US in recent years. If cotton prices fall too far or if soybean prices stabilize, cotton may fail to gain the 1 1/2 to 2 million acres that some feel are needed in 2009/10. Still, the US economic outlook may continue to outweigh these long term supportive factors for now, especially if the dollar remains near the 2010 highs or moves higher. Commercials and funds were moderate buyers yesterday. Support also came from China’s announcement that its 4th Quarter growth hit 10.7%, up substantially from the 3rd Quarter. A big soybean sale to China was also announced yesterday morning which suggests that China continues to be a big buyer in commodities despite recent actions to restrict lending. Open interest fell by over 3000 contracts in cotton on Wednesday, and stocks registered for delivery against the ICE No 2 cotton contract increased to 437,781 running bales today from the previous day’s total of 433,303 running bales.
TODAY’S GUIDANCE: Cotton fell by 6.00 cents from the first trading day of 2010 through the middle of this week and that has brought a pause in the selling. However, there is still more room to go on the downside. Look for the March contract to push below the 100-day moving average. Light support is at 70.52 in the March contract with next support 69.75 and 67.88. Resistance remains at 72.43 and then 73.35.
Tags: Cotton, Softs
About Terry Roggensack