Mumbai (Commodities Control) – NY cotton May futures contract shed 20 points or 0.22% for the week ended 12th March, finishing at 87.56 cents/lb. Though ICE cotton futures registered minor losses for the week but during the week it was highly volatile due long position liquidation by managed money at higher levels and short covering by trade at lower levels.
On Monday, ICE cotton futures closed with moderate gains. May futures closed with a gain of 0.64 % or 56 points bolstered by hopes of recovery in the global economy and tighter US demand-supply portion.
However, on Tuesday most active ICE cotton futures shed 400 points despite supportive WASDE reports. This fall was attributed to speculative selling and position realignment which ultimately resulted in a limit-down settlement.
Cotton futures jumped over 3% on Thursday, aided by an easing dollar that slipped to a one-week low and a U.S. weekly federal government report that showed higher U.S. export sales.
Though cotton closed 3% up on Thursday trade but in overnight trade, it was down by 240 points at one point of time but the market was able to slowly recover towards a more moderate negative close of 79 points at 87.56cents/lb.
The weekly data release from CFTC showed managed money cotton traders were 57,831 contracts net long as of 9th March. That was 8,200 contracts reduction on the week. Long side positions dropped by 7,291 contracts, while short side positions witnessed a small addition of 909 contracts. On the other hand, Trade reduced their short position by 9,764 contracts. Their long side position increased by 2,229 contracts and short was down by 7,535 contracts. The open interest for the week was registered at 288,051 contracts vs 294,976 contracts last week.
Tuesday's fall of 400 points was accompanied by a fall in open interest 2,925 contracts indicating long liquidation at higher levels. Meanwhile a 403-points gain on Wednesday and Thursday was accompanied by fall in open interest by 2058 contracts indicating short covering at lower levels.
Reduction in short position of Trade participants and long position of Managed money indicating that trade has liquidated long position. This reduction of long and short positions by Managed money and trade is the reason behind sharp volatility in the market and it is likely to continue till these positions get squared off.
Market participants are of the view that the dramatic fall in the latest week, was merely a technical correction in an overbought market. They are of the view that tight US demand-supply position, increase in cotton consumption amid recovery in major global economies and huge short position by Trade are likely to keep markets firm in the near term.
Market analysts note that in the upcoming week/s, uptrend may be expected while the market is trading above support level 85.49 cents, which will be followed by reaching resistance level 90.75 – 92.59 cents/lb. But a downtrend will start as soon as the market drops below support level of 85 cents, which will be followed by moving lower to support level of 78.5 cents/lb.
Immediate support and resistance for ICE Cotton May contract lies at 86.18 cents and 88.72 cents respectively.
0 Comments 
Post Comment 
