The cotton market is slightly lower Tuesday as its extreme overbought condition is causing some bullish traders to pause. In addition, other commodities markets are also experiencing small price reversals today as well as there seems to be a wave of collective selling on this Tuesday morning. Still, the cotton market is very close to approaching its June 2018 tariff highs.
There were 15 notices issued against the spot March contract this morning. All were delivered by Term Commodities, with Wells Fargo the lone stopper. To date there have been a total of 33 notices tendered.
Federal Reserve chairman Jerome Powell will testify to both sides of Congress this week. He will speak to the recovery of the U.S. economy and make a determination about interest rates. To that end, the U.S. Dollar Index has been trading both sides of its 90-cent mark, a psychological level of support. A somewhat weaker dollar is viewed as supportive to U.S. exports as it makes U.S. farm products more competitive on the world market.
The market is also anticipating Thursday’s weekly export sales for USDA. Merchants have been reporting strong demand causing the trade to expect further reductions in 2020/21 U.S. ending stocks. To that end, U.S. sales have already reached 92% of the forecast for the year versus a five-year average of 80%. This suggests USDA could raise its export forecast in future reports, which would tighten ending stocks.
For Tuesday, support for May cotton is 90.90 cents and 89.50 cents, with resistance at 93.50 cents and 94.00 cents. The estimated morning volume is 12,219 contracts.