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Weekly: NY Cotton Drops Over 1% amid Renewed Virus Fears, Strong Dollar

27 Dec 2020 6:59 pm
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Mumbai (Commodities Control) –NY Cotton shed 1.28% or 99 points for the holiday-shortened week ended 24th December. The weekly fall is the first one after two straight weeks of upward rally. NY Cotton futures of March contract gathered 308 points for the week ended 18th December and 251 points higher for the prior week.

Having said so, ICE cotton futures edged higher on Thursday, supported by a weaker U.S. dollar and strong demand for the natural fiber, while Christmas Eve drew thin trade across the board.

The cotton contract for Mar 21 closed at 76.2 cents per lb, up 6 points, after rising nearly 2% in the previous session.May 21 Cotton closed at 76.86 cents, up 12 points and Jul 21 Cotton closed at 77.41 cents, up 14 points. Dec 21 Cotton closed at 73.7 cents, up 43 points. Mar’21-May’21 spread stands at 66 points vs 67 points last week.

The market was closed on Friday for Christmas Day.

The four trading sessions between December 21-24 were divided itself into two days of decline and two days of rise.

The fibre on ICE futures tanked to settle with triple digit losses at the beginning of the week. Cotton prices dropped more than 3% on Monday in tandem with other global markets on worries about a new strain of the coronavirus in Britain, while a stronger dollar added to the downbeat mood.

The cotton contract for March closed at 74.76 cents, down 240 points, after falling to a near one-week of 74.60 cents earlier in the session and May 21 Cotton closed at 75.48 cents, down 235 points.

Stronger dollar continued to weigh Cotton #2 lower, as the most active contract on ICE futures breached the 75 cents level. The cotton contract for March 21 Cotton closed at 74.77 cents.

However yet another strong US weekly export data brought in a new lease of life for NY cotton during mid-week. ICE cotton futures rose as much as 2.1% on Wednesday, supported by a strong weekly exports sales report and a weaker U.S. dollar, with prices of the natural fiber also latching onto upbeat sentiment in wider markets. The cotton contract for Mar 21 closed at 76.14 cents, up 132 points.

The U.S. Department of Agriculture's weekly export sales report showed net sales of 416,700 running bales for 2020/2021, slightly lower compared with the previous week but up 14% from the prior four-week average. That was up 67% yr/yr. China was the top purchaser on the week with 186,000 RBs booked. New crop sales came in at 67,144 RBs.

On Thursday, a trade deal between Britain and the European Union also lifted risk sentiment in the wider financial markets.

This week’s CFTC data will now be released on 28th December on account of federal holiday on 25th December. Last week, CFTC data showed a 13% increase in cotton speculative trader Open Interest. The new buyers extended the net long 11,221 contracts to 69,997 contracts for the week ended 15th December. There were also 13,933 new commercial shorts reported on the week, extending the commercial net short to 140,536 contracts.

Total futures market volume fell by 14,177 to 5,985 lots.Certificated cotton stocks deliverable as of Dec. 22 totaled 77,326 480-lb bales, unchanged from 77,326 in the previous session.

Market expert Anton Kolhanov of kolhanov.com

says that the uptrend may be expected to continue, while the market is trading above support level 75.45 cents, which will be followed by reaching resistance level 78.50 cents.

Support and resistance for Cotton #2 lies at 75.55 and 76.91 cents per lb, respectively.

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