Affected by the UK becoming the new eye of the global epidemic, London and southeastern England being closed, more and more countries banning entry from the UK, and the United States experiencing its worst week since the epidemic, European and American stock markets and futures fell across the board. , international oil prices once fell by more than 4%, and the dollar-pound exchange rate once rose above 1.32, recording the largest single-day decline since March. The ICE market stopped rising and diving under the pressure of negative external markets and falling commodities. The main contract broke through the two levels of 77 cents/lb and 75 cents/lb in a row. Funds and bulls retreated to 75 cents/lb to gain momentum. The market is worried. Emotions are gradually relieved and released.
The author judges that the short-term market correction is conducive to laying the foundation for ICE’s rebound. The long and short parties will once again fall into a stalemate and stalemate in the 75-78 cents/pound box, but the center of gravity will slowly move upward and enter 80 cents/pound. The trend and direction remain unchanged. Below 75 cents/pound are opportunities for domestic cotton textile enterprises and traders to enter the market in batches and proportional purchases. The reasons are as follows:
First, the new round of commodity bull market has merged. Not finished yet, still on the way. Commodity prices have now rebounded from spring lows, with copper, iron ore and soybeans rising to their highest levels in more than six years, driven by strong demand from China. Chinese importers have now been joined by global macro investors who view commodities as an investment tool to bet on global economic recovery and to hedge against the prospect of high inflation. Many investment banks believe that commodity prices will rise;
Second, global food prices may continue to rise due to the impact of climate and the epidemic. The spread of the COVID-19 epidemic has brought about travel restrictions, border closures, quarantine policies, and market and trade disruptions, seriously affecting global supply chains and posing a threat to food security. In one month, the global cereal price index rose by 8%, the wheat price index rose by 7%, and the corn price index surged by 18%;
Third, in response to the new crown epidemic, central banks around the world can only adopt large-scale monetary easing policies. And there is no choice. Inflationary pressure is becoming more and more prominent. Not only does the Federal Reserve continue to print money without limit, the European Central Bank, Japan, South Korea, Australia, Canada and other central banks are all releasing liquidity significantly in response to the impact of the epidemic. Recently, the Central Bank of China has also frequently used the “MLF + reverse repurchase” combination to provide liquidity to the market, and inflation expectations will continue to rise again and again;
Fourthly, on the fundamentals, Pakistan’s output and demand, Brazil’s There is still room for speculation in planting, US cotton production and quality, which will “add fuel to the flames” of the rebound in ICE. Pakistan’s cotton imports in 2020/21 are expected to exceed 10 million bales, and Indian cotton is basically excluded. Therefore, US cotton, Brazilian cotton, and West African cotton are the focus of procurement; in Brazil, the significant reduction in planting area in 2020 has led to a production drop of more than 11%. The planting area in West Africa will also decline sharply in 2021, and the focus of funds and market attention will begin to shift to 2021. </p
