Cotton futures finished lower Tuesday on a fresh round of investor sales as the market failed to derive any inspiration from a recovery in the commodity complex after a holiday weekend, brokers said. The market was shut Monday for US Independence Day. The key December cotton futures on ICE Futures US dropped 2.29 cents, or nearly 2.0 percent, to settle at $1.1552 per lb, dealing from $1.1502 to $1.1959.
Volume traded stood at 16,100 lots as of 2:41 p.m. EDT (1841 GMT), about a fifth below the 30-day norm, Thomson Reuters preliminary data showed. Analysts said the December contract's Bollinger band, a popular technical indicator for traders to determine a relative definition of high and low prices, showed it is approaching the lower end of that band and may go below it. Thomson Reuters data showed the bottom of the range around $1.137. A fall in December below the bottom of that band could lead to further losses in the market, said Mike Stevens, an independent cotton analyst in Louisiana.
"We've been shooting technically for ($1.137)," he said, adding the inability of cotton to follow the rest of the commodity complex higher inspired further investor liquidation during Tuesday's session. Traders said the market is still monitoring conditions in Texas and the discussion is now going to focus on how much of the US cotton crop would be harvested in the fall.
Despite the drought, the market's action is reflecting concern that already high cotton prices are lowering demand for the fibre. "Difficult growing conditions in the US and India are being offset by weaker textile demand, however," said a daily commentary by brokers Flanagan Trading Corp in North Carolina. On the weather front, more extreme heat is in store for the US Southwest and Texas through Saturday, forecaster Telvent DTN said in a daily comment. Open interest in the ICE futures cotton market stood at 140,014 lots as of July 1, the highest since June 21, ICE Futures US data showed. Volume traded on Friday stood at 8,395 lots, the smallest amount traded since May 23, it added.
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