Thursday started with two anticipated news in the market: European Central Bank raised its key interest rate by a quarter of a point to 4.25% in an effort to combat worsening inflationary situation; and U.S. employers cut payrolls by 62,000 in June, making the unemployment rate steady at 5.5%. Dollar index reacted to the news by trading extremely friendly and Dow Jones also closed out the week by slight gain on the day.
Overnight ICE cotton opened at around 50 points higher, but slid lower during pre options trading. Decent volume of bullish options in December contract call spreads buying and put spreads selling held the market above 75 cents, but soon Z'08 made an intraday low at 74.52 upon grains market re-open. Trading then quiet down and stalked in the lower range. Screen buying prior to options close took cotton on a surprising bounce movement to last trading electronically at 75.86.
NY cotton futures posted a hefty drop of 6 cents during this week's trading. The bearish acreage report started the week off on a negative note followed by funds technical selling. Cotton trading, on the other hand, remains choppy and outperformed by grains.
This morning's export number is improved from last week with a combined 90,000 bales in sales for both marketing years and 385,000 bales in shipments (chart on page 2 in attached PDF). NY cotton is closed tomorrow in celebration of Independence Day holiday, while market takes a break from the recent losses.
Cotton futures are on a losing string in this short trading week as lower highs and lower lows were created daily. Today's session managed to bounce on the close and post a green candlestick on the technical chart. December contract broke through 75 cents yet again, established a new three week low, but recouped most of the loss on the day. MACD has made a clear cross downwards and the two major moving averages are also converging.
Trading was still choppy in light volume amid uncertainties in the market. It looks like we're trying to test low and find a short term bottom, but anything could happen after the long weekend.
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