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NY cotton futures continue to trade lower
Jul '08
NY cotton futures continued to trade lower Wednesday in thin volume, which marked the third continuous weaker session this week. Overnight ICE opened at slightly higher and tried to maintain the price level above 76 cents but failed. Early morning options pit trading was featured by some good volume of H'09 put spreads selling and Z'08 dollar call buying.

Not supported by these bullish options or the strength from the grains market, cotton futures slid to trade at today's low of 74.97 briefly. 75 cents proved to be a good support level and Z'08 then traded between 75.00 and 75.50 for the rest of the session before it last traded at 75.79 electronically, down 104 points from yesterday's settlement.

US dollar keeps weakening ahead of European Central Bank meeting and its interest rate decision tomorrow, and has dropped to a low since end of May. Amid worsening inflation and slower economic growth in Europe, ECB is likely to raise the eurozone interest rate by a quarter of a point. Not reflecting the weakening dollar or the higher grains prices, cotton futures has separated itself from the outside markets and now trades on short term fundamentals.

There are mixed feelings by the market players as we are heading into the Independence day weekend, the market feels comfortable to trade around 75.50 level. Tomorrow's export number is expected to be somewhere close to the previous one, and we'll need a low 70's before we see mill orders coming in.

Today's session painted another negative picture on the technical chart. December contract broke through the 75 cents level and established a new three week low. However market successfully closed above that level trying to find a bottom before the long weekend. It now settled below both moving averages and MACD has made a clear cross downwards.

Trading was still choppy in light volume amid uncertainties in the market. Tomorrow is the last trading day before the holiday weekend, and we could continue to challenge downward at the current support level of 75 cents basis Z'08.

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