USA: Traders slightly reduce their long positions in cotton

Friday session brought some fireworks to this week’s trading as the market is getting ready for the long weekend. ICE cotton futures and options will be closed on Monday May 26th in celebration of the Memorial Day.
A 70 point trading range was holding well before re-open of the Chicago grains market, but the strength in other commodity gave cotton a little push and set today’s high right under 70.50 basis N’08.
Even though strength was still seen in the general commodities while dollar was trading weaker, cotton disconnected itself from the outside and posted a sharp and quick drop, which surprised the market.
The long term support at 68.52 set on May 1st was quickly broken and the majority of the session was trading below this area. It again proved that demands were awaiting under the market and good amount of business was done this morning, which placed orders from trade to support the 68 cent level.
Short covering before the weekend as well as some bullish options eventually took the cotton on an upside movement and settled N’08 at 69.21. We have seen slow increase in the open interest and trading volume over the course of this week. Open interest has grown from last Friday’s 259,699 to 268,828 contracts.
Friday’s commitment of traders report shows that index traders slightly reduced their long positions in cotton, and trades increased their hedge positions as bearish fundamentals remain unchanged.
Following the weakness yesterday, NYF cotton hit multiple sell stops on its downward momentum and eventually broke the key support at 68.52 basis N’08. As cotton gained part of the loss today, it settled within the trading range which was established on May 1st.
This could indicate a potential of continued range bound trading in the near term trading sessions to come. RSI is currently at 38%, an oversold area, and the MACD is about to cross. As no changes have been noticed in the fundamental side, cotton will most likely trade sideways until options expire. The next major support level lies at 67.50 on July.