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ICE’s rebound may encounter “stumbling blocks”



Since mid-February, the main contract of ICE cotton futures has continuously tested 70 cents/pound, but all ended in failure. The confidence of funds and bulls has faded, and both bulls and shorts have repeated…

Since mid-February, the main contract of ICE cotton futures has continuously tested 70 cents/pound, but all ended in failure. The confidence of funds and bulls has faded, and both bulls and shorts have repeatedly seen each other in a narrow space and reached a stalemate.

According to CFTC statistics, the net long rate of ICE cotton futures funds has risen to 15.12% so far (an increase of 0.06% from last week), and there are 60,530 ON-CAll contracts for 19/20, which is larger than the beginning of last week. The number dropped by 2,791, a decrease of 4.41%. Therefore, some institutions and cotton-related companies believe that as the pneumonia epidemic in China is brought under control, the first phase of the Sino-US trade agreement is effectively implemented, and yarn mills in Southeast Asian countries purchase medium and low-quality US cotton, the main ICE contract will exceed 70 cents. / pound, hitting the 72 cents / pound, 75 cents / pound and other levels. Therefore, international cotton merchants and import companies are reluctant to sell and wait for prices to rise. The sentiment is still widespread.

The author judges that ICE’s long-term bullish and rebound trend remains unchanged, but in the short term it is suppressed by the following factors or the upward trend is weak. The main contract is expected to break 68 cents/pound or even 66 cents/pound. Strengthened, ON-CALL point-price contracts continue to decrease:

First, the new type of pneumonia is experiencing explosive growth in Japan, South Korea, the United States, Italy and other countries, and a global defense war has begun. On February 23, the U.S. Centers for Disease Control and Prevention (CDC) admitted that the novel coronavirus pneumonia epidemic may become a pandemic in the United States. Now U.S. health agencies are preparing for this. South Korea, Japan, Malaysia, and some European countries have successively fallen into the epidemic. The impact of the epidemic on the global economy , the impact is increasing;

Secondly, the cotton planting area in the United States may decrease slightly in 2020, and the USDA forecast deviation is large. Recently, the USDA Outlook Forum predicted that the cotton planting area in the United States will decrease by 9% year-on-year in 2020; however, the NCC (National Cotton Council) believes that the intended planting area of ​​​​U.S. cotton in 2020 will be 13 million acres, a year-on-year decrease of 5.5%. Some international cotton merchants and exporters It said that based on factors such as weather, grain and cotton price ratios and cotton subsidies, the actual planting area of ​​US cotton fell by less than 5% year-on-year;

Thirdly, the U.S. dollar index continued to strengthen, approaching the 100 mark, and commodity futures rebounded Pressure builds. After risk assets and safe-haven assets rose simultaneously, global financial markets finally saw some subtle changes last Thursday. In the foreign exchange market, the U.S. dollar continued to rise strongly against a basket of currencies, reaching a maximum of 99.91, a level not seen in the past three years. It is only one step away from the 100 mark (since the beginning of 2020, the U.S. dollar index has risen by nearly 3%) . </p

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Author: clsrich

 
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