The overnight cotton market is essentially unchanged. Tuesday saw a much improved session in that spot May did make a new price high for 2019. However, bearish speculators defended the area, and prices retreated. We are thinking if the market can collectively close over the January high, it would take on a more bullish persona.
Naturally, the ranking fundamental hope for even higher prices lies with the success of the U.S.-China trade talks. To that end, rumors have it the Chinese are wanting to backtrack on some previously agreed upon conditions. This twist has raised the anxiety of all global markets.
Wednesday at 2 p.m. CST, the Federal Reserve will announce its stance on domestic interest rates. It is expected the Fed will not raise rates, and will hopefully maintain its dovish tone in its accompanying afternoon testament.
Thursday, USDA will post its latest sales and export data at 8:30 a.m. CST. Last week saw China as the main buyer of old crop cotton, which was something of an oddity. For weeks on end, China has been a net canceler of U.S. cotton as a protest over the implementation of U.S. tariffs.
To counter the U.S. shortfall, China has sought cotton from other sources such as Brazil and India. We understand certain high-end grades of cotton are not available in those countries, nor are their delivery systems totally adequate. However, a small offset might lie in the fact the Indian rupee and the Brazil real are substantially weaker than the U.S. dollar.
For Wednesday, support for May cotton may be found at 74.95 cents and 74.20 cents, with likely resistance at 76.35 cents and 77.65 cents. Overnight estimated volume stands at 2,296 contracts traded.