Cotton Consolidation Continues!
Range-bound trading may continue in Cotton futures this week, as traders gear up for the August USDA crop report on Friday. The August report is widely anticipated, as it is the first report of the season that uses actual surveyed data, thus providing a better estimate to the size and condition of the crop. U.S. and world Cotton production is expected to decrease this season, as U.S. growers have switched acreage to more profitable crops such as Corn or Soybeans, and poor weather conditions in China have caused analysts to lower estimates of the Cotton crop there. On the export front, the 2007-08 marketing year is off to a solid start, with U.S. Cotton exports running at 8.4% of USDA projections for the year, up by 1.3% from this time last season. Traders will also focus on this afternoon’s USDA weekly crop progress report to see if the Cotton crop ratings fell again last week.
Looking at the daily chart for December Cotton, we notice a rising wedge formation unfolding the past two weeks. Prices remain below the 20-day moving average, currently standing at 6507. The 14-day RSI is reading a rather neutral 55.55 this morning. Though trading should be choppy the next few days, Friday’s report has the potential to be the catalyst for direction in Cotton prices heading into the fall harvest period. In early trade, December Cotton is trading at 6470, down 19.
