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Weekly: ICE cotton posts triple digit loss amid stronger dollar, virus concerns

28 Nov 2021 6:49 pm
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Mumbai (Commoditiescontrol): ICE cotton futures posted triple digit loss this week amid stronger dollar and the discovery of a new coronavirus variant lowered market sentiment and raised concerns about demand for the natural fiber.

The December cotton contract closed with a loss of 262 points or 2.20 percent at 116.60 cents per lb, whereas the most active March contract lost 465 points or 4.00 percent and finished at 111.78 cents per lb for the week ended on 26th November.

"The obvious driver coming to play in the market is the headlines about the variant of the virus resulting (in a) sell off and a risk-off environment ... Mills may have pulled back some of their buying overnight and it left a void in the market," said an analyst.

"U.S. cotton should get hit harder than most other markets due to liquidity and the size of the speculative length in the market."

The EU, India, and the United Kingdom all tightened border controls in response to the new coronavirus variant on Friday.

As a result of renewed Covid infections and a heated economy, the U.S. dollar is strengthening versus other world currencies. Last week, it hit a 16-month high at 96.26, up one percent for the week.

The U.S. Department of Agriculture said in a weekly crop progress report on Monday 7 percent of the cotton was harvested in the week ended Nov. 21, compared with 65 percent the week before.

The U.S. Department of Agriculture's weekly export sales report on Friday showed net sales of 196,900 running bales, up 44 percent from the previous week and 3 percent from the prior four-week average, with China being the top buyer.

The CFTC will release its Commitments of Traders data on Monday.

Cotton-on-Call based New York, dated 26
th November showed that the total unfixed call sales were reported at 156,735 vs 160,993 contracts on a weekly basis and total unfixed call purchases were reported at 40,594 vs 43,421 contracts. For March 2022, unfixed call sales were registered at 68,292 contracts and unfixed call purchases were registered at 12,224 contracts.

US consumers continued to spend aggressively in October, with retail sales up 1.7 percent, despite a 0.7 percent decline in Clothing & Clothing Accessories. Imports into the United States are at an all-time high, and the flood of containers entering the country has yet to abate.

China cotton and yarn
futures both closed down for the week tracking ICE cotton futures. ZCE benchmark cotton yarn Jan 22 futures were down by 1.16% at 29300 CNY/MT . On the other hand, ZCE benchmark cotton Jan22 futures was down 0.99% at 21475 CNY/MT. Fall in the Chinese market is relatively lesser than the global benchmark US market indicating strong demand.

Looking ahead next week, the focus will soon shift to expectations for the December WASDE report, but traders will be focused on their physical trading and execution for the next few weeks. The next week's focus will be on classification, receiving, and the weekly Export Sales Report.

The market may trade weak in near term tracking weak financial markets which may result in long liquidation by managed money and a strong dollar. But downside appears to be limited due to the strong demand for yarn and apparel globally.
Immediate support and resistance for Cotton #2 lies at 108.68 and 116.04 cents per lb, respectively.

(By Commoditiescontrol Bureau: +91-22-40015505)

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