Cotton futures (COTTON) on ICE are losing more than 1.5% today, which we can justify with a still very strong dollar, and a big pullback in oil and Chinese indices.
- It seems that the cotton market will wait carefully until the October 11 USDA WASDE supply-demand balance estimate report to determine the final cotton prices trend; the framework of which we can tentatively define as a drop below $70 (if production estimates will be soft or even higher than in September), or a rebound above $75 per bale (if the report brings large downward revisions to production).
- Cotton crop losses from Hurricane Helene are still difficult to assess, with estimates ranging widely from huge estimated losses to relatively balanced ones. Two more hurricanes, Milton and Kirk, are currently raging on the U Southeast, but their impact on cotton also appears to be unpredictable, as cotton crop season ends;
- The latest CoT report from Friday turned out to be moderately positive for cotton (a slight net decrease in short positions in the large funds and Managed Money speculators group, with indecision in the hedging 'Commercials' institutions group). Despite on that, we saw another downward impulse after reaching $74 resistance, yesterday.
COTTON chart (M15 interval)
Looking at cotton, we can see that the price is testing the contractual trend line today, and if there is a rebound from this level, supported at the same time by a potential 1:1 correction (red rectangles) we can expect a rebound to the area of $74 per bale. Another downward impulse, on the other hand, could take prices to $71.8, where we see the 38.2 Fibo, and this scenario now seems equally likely.
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