Ready For Self Rescue: How Far Is The Bottom Of ICE Cotton After The Sino US Trade Negotiations?

In July 30th, ICE futures fell sharply again. Before the negotiations began, the market had basically given up hope. Trump said China hopes to wait until the New Democratic president of the United States comes to power to sign the agreement. Moreover, if negotiations fail to reach an agreement, he will still levy tariffs on the remaining 350 billion US dollars in Chinese products. In addition, he believed that China did not purchase enough American agricultural products in accordance with the commitments of the G20 summit.

The supply pressure of cotton market has not lightened. The latest report shows that the excellent and good rate of cotton rose to 61% last week, 18 percentage points higher than the same period in the past five years, 11 percentage points higher than the mean in the past ten years. The excellent and good rates in Texas and Georgia were 59% and 61% respectively. The US Department of agriculture's forecast of supply and demand in August is likely to continue to increase US cotton output next year.

Speculative short positions remain at a historical high and there is no idea of closing positions. The only possible change in the price trend is the complete settlement of Sino US trade, and now the two sides are far from reaching agreement. In terms of technical figures, if we can not know whether it is bullish or bearish, we can draw a long distance from the daily graph. Now the trend line is from the upper left corner to the lower right corner, and the low price is constantly refreshing.

The Federal Reserve will announce its exchange rate policy on Wednesday, and the market is expected to cut interest rates by 25 to 75 basis points. If it is fulfilled, it will be the first rate cut in two years. Generally speaking, interest rate cuts mean that the US dollar will fall, which will benefit US exports. However, interest rates are very low in many countries, and the US dollar has become a target of pursuit, and will remain strong in the future.

The need to remind the market is that the current contract in December is about 63 cents, the lowest point in nearly ten years is 54.19 cents in 2016, the market may be approaching the bottom, and the possibility that the bears will continue to vigorously sell at the current low price position is also decreasing. Moreover, compared with cotton, the price of corn is still at a high level, and the current cotton price is unfavorable for planting next year. If the Sino US trade war is maintained, corn will occupy the US cotton area next year, and the market needs to guard against this.