Market Analysis: The Cotton Market Environment Is Not Optimistic. Traders Are Unanimously Short When The Dollar Rises

The cotton market continued to decline slowly. After the Federal Reserve said that it would slow down the pace of interest rate hikes in the future, cotton prices continued to fall to new lows. Traders were concerned about whether the rise of the US dollar would hit US cotton exports.

According to the latest US cotton export weekly report, the contracted volume of US upland cotton this year last week increased by 27% compared with the previous week, but still decreased by 19% compared with the average value of the previous four weeks. The overall level is still low, and China has few purchases. At the same time, shipments of American cotton continued to decline. So far this year, the contracted volume of American cotton is only five times higher than the average value of the same period in the past five years, and the shipment volume is only one time.

Analysts believe that the continuous decline of American cotton shipment indicates that factory production at this stage is only to meet the immediate demand, and long-term orders and replenishment demand are still insufficient. The continued downturn of American cotton exports has led to the market using the way of continuous selling to stimulate demand. At the same time, the market is worried that the slow growth of China's economy will lead to a decline in cotton import demand, so the market speculation continues.

The 25 basis points interest rate cut announced by the Federal Reserve on Wednesday was in line with market expectations, but more importantly, the four interest rate cuts originally planned for next year were reduced to two at most. Investors believed that this practice was hawkish, which triggered fluctuations in the financial market.

On Thursday, ICE cotton futures hit a new low under the suppression of technical and fundamental aspects. All contracts fell below 70 cents this year, and the cotton market became more bearish. Speculators, cotton merchants, cotton farmers and funds were all unanimously short. Last week, the fund's net short position was 22000. After this week's selling, it is expected that the net short position will further increase.

On the same day, the dollar index emerged to follow up the buying, and the market continued to digest the impact of the Federal Reserve's slowing rate cut. After the decision of the Federal Reserve led to the rise in the yield of US treasury bonds and the strength of the US dollar, the exchange rates of other countries generally weakened.

Next week will usher in the Christmas holiday, and the market turnover will be more light. During the holiday, ICE will be closed for nearly two days. The market will be closed early on Christmas Eve, and the release of American Cotton Export Weekly will be postponed to one day.

On the technical side, after the contract reached a new low in March, there was some profit taking. Shorters continued to control the trend of cotton prices. However, in the case of excessive oversold, there may be some support from technical graphic correction at any time. Many parties hope to break the upper resistance level of 68.40 cents, and then challenge 69.23 cents. The lower support levels are 68 cents and 67.56 cents.