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ICE Cotton Slumps 4%; Biggest Daily Fall in 4 Months

8 Aug 2020 8:46 am
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Mumbai (Commodities Control) – ICE cotton futures slumped more than 4% on Friday, which could be their biggest daily fall since early April, as speculators gave up their positions fearing that amid a lack of demand the natural fiber could no longer hold gains.

Cotton contracts for December fell 2.23 cents, or 3.4%, to 62.62 cents per lb at 2:09 p.m. EDT (1809 GMT), having hit a one-week low of 62.15 cents earlier in the session. December Cotton closed at 62.36 cents, down 249 points. For the week, the contract is down 0.5% despite climbing to a one-month high on Thursday.

October Cotton closed at 61.88 cents, down 253 points and March 21 Cotton closed at 63.19 cents, down 230 points

"Cotton tested a resistance at 64.90 cents yesterday and it traded above that range for some time but failed to close above it," said Bailey Thomen, cotton risk management associate with StoneX Group.

"We are seeing a lot of speculators giving up their positions as fundamental factors, mainly demand, are lacking for cotton to break above that level."

Demand for the natural fiber has plunged as coronavirus has forced governments around the world to impose lockdowns, keeping people at home and hurting the apparel market.

The contract has fallen 11% so far this year.

"Even though the weather in Texas stirred some damage concerns, there is not enough demand to even match the supply after the damage," said Jack Scoville, vice president at Chicago-based Price Futures Group.

Markets now await the U.S. Agriculture Department's monthly supply and demand report next week and an Aug. 15 meeting between the United States and China to review their Phase 1 trade deal.

Tensions between the two nations flared up as U.S. President Donald Trump unveiled sweeping bans on U.S. transactions with two popular Chinese apps.

Total futures market volume fell by 195 to 29,218 lots. Data showed total open interest gained 7,515 to 194,190 contracts in the previous session.

The Commitment of Traders report with data from the week ending August 4, showed cotton speculative traders were 31,335 contracts net long. That was an increase of 5,700 wk/wk from short covering.

Support and Resistance for cotton #2 lies at 60.41 cents and 65.85 cents per lb, respectively.

(Commodities Control Bureau)

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