The cotton market is trading both sides of Tuesday’s close as it weighs the souring factors of the U.S.-China trade relationship. China’s move to gain a tighter grip over Hong Kong has infuriated many countries, especially the United States.
At a press conference yesterday, President Trump indicated a more rounded response to China’s actions will be forthcoming as soon as this Friday.
Tuesday, USDA reported the 2020 crop is 53% planted, compared to the 5-year average of 53%. Specifically, Texas is 50% versus 45% last year, compared to the five-year average of 41% complete. Georgia stands at 57% done, versus 72% this time last year and the five-year average of 65%.
This Friday, USDA will issue its export sales data. China has been the dominant buyer of U.S. cotton for four consecutive weeks, but given the growing intensity between the two countries, traders will not be surprised to see China cancel some purchases.
Technically, July cotton is overbought suggesting the contract is vulnerable to a setback. The huge reversal of trade on May 20 continues to act like a lid on prices. Additionally, with July’s options expiration and delivery right around the corner, time is definitely running out for holders of all options and certainly producers with price later contracts.
For Wednesday, support for July cotton is 57.50 cents and 56.80 cents, with resistance at 59.45 cents and 60.00 cents. Current volume stands at 4,272 contracts.