Weekly: ICE Cotton Rebounds On Strong Equities, Fed Comment

MUMBAI (Commoditiescontrol) – ICE cotton earlier this week dropped to more than 1-year low, but short covering helped prices to pared losses and closed in positive territory. The most-active March cotton on ICE exchanged settled this week up 0.45% to 72.52 cents per pound.

ICE cotton prices this week were mostly in downtrend, but pullback of more than 2% on Friday on bargain buying followed by about 700 gain on Dow Jones and comment by Fed chair Mr Powell that Fed may not increase interest rate in 2019 supported the market.

Cotton prices earlier this week fell to 70.65 cents per pound, lowest level since December 12, 2017 mainly due to ongoing trade dispute between the US and China, falling stock markets around the globe and a tense political climate are all causing uncertainty and fear among investors.

Due to the ongoing government shutdown in Washington, reports like the weekly export sales or the CFTC spec/hedge report are currently not being released. The way things are going it could be a while until we get these data sets again.

U.S cotton prices at 70 level is becoming quite attractive, especially since India’s smaller crop and the MSP (Minimum Support Price) keep local values from following US prices down.

Lower U.S cotton prices is likely to boost export demand from overseas mainly due to absence of stiff competition this season, apart from some West African and Brazilian cotton and this could act as positive for U.S fibre.

Cotton prices are also likely to be supported by bounce in crude oil prices after proposed trade talks between the United States and China eased some fears about a global economic slowdown. Brent increased about 9 percent for the week, while WTI rose by nearly 6 percent.

China’s Commerce Ministry confirmed that a delegation of U.S. officials will travel to Beijing for a new round of trade talks on Monday and Tuesday, according to news reports.

Sentiment also got a boost after China’s central bank on Friday cut the ratio of cash that banks must hold as reserves by 100 basis points, or 1%.

The recent sharp losses in dollar index is also one should keep an eye as it dropped third straight week.

Trade talks between the U.S. and China are the big event for markets in the week ahead and market players will closely watch the development about trade talks between these two largest economies as future trend is very much depend on this event.

TECHNICAL IDEAS: ICE Cotton March 2019 Weekly: Cover Short Position

A Doji and Hammer on weekly chart suggest that fall is arrested till 70.65 is not violated. Further weakness is below 70.65.

Traders short and holding the same can maintain the stop loss at 74.18.

Resistance will be at 73.62-74.18.

A rise and close above 74.18 can mark a swing bottom.

Sell is below 70.65 or cover short position as long as 70.65 is not violated.

Pullback reversal can happen on close above 74.18 for rise towards WRV-78.27.



(By Commoditiescontrol Bureau; +91-22-40015533)