The USD and stock markets are trying to establish a bottom as we hear more and more congressional testimonies expressing concern over the weak dollar and record high food and energy prices.
This trend will not be ending anytime soon and we should see friendlier monetary and fiscal policies that will support the equity markets and may take some investment out of the commodity complex.
At the moment, cotton seems to be forming a trading range between 70/80 cents. We find good demand scale down when the front month breaks 70 cents, but there is good trade scale up selling above 80 cents where certing cotton becomes more attractive.
After a bearish week in the commodity complex, we were able to see some strong bounces in the energy and grain sectors. Cotton also was able to find good buying support under 72.50 as it closed higher on the day.
We seem to find good support in cotton with V'08 under 70 cents and this will probably remain the case over the short term.
As we suspected export sales were very unimpressive at only 50k bales, but shipments remain strong as we are close to winding down the crop year which ends on July 31st.
Volume continues to be very light in cotton with only 12,000 futures and 9,000 options while members of the cotton industry spoke on Capital Hill about speculator manipulation back in March.
The USDA S&D report comes out tomorrow morning and we are expecting slight changes in cotton, but possibly more significant changes in the corn and soybean production numbers based on the floods we had in Iowa during June.
In any case the late surge in oil prices, may lead to some more upward follow through in some areas that fell pretty hard this week.
If anything, we can be assured that the commodity complex bubble has not burst yet and we may see retests of the highs further into the summer.
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