After climbing to a five month high last week, cotton futures suffered a near 10% loss this week with the spot December contract dropping over 900 points to close at 84.08 c/lb. Technicals turned weak after futures prices failed to advance further higher, and specs started to liquidate their longs with massive sell orders hitting the market.
With very little buying supporting the prices, market collapsed and cotton futures locked limit down on settlement Tuesday. Total open interest dropped by 22k contracts in futures during the course of the week. Physical activities finally started to pick up on a much weakened market, and trade buying kept the market supported at 84 cents.
The focus for macro-watchers this week was on the release of the Fed’s meeting minutes on Wednesday from the July meeting. Language regarding the economy and “tapering” was much as expected, with most analysts forecasting the Fed to announce a reduction of about $10b USD per month of purchases at the September meeting. Bond yields continued their climb as the US 10-year currently at 2.81%.
In the rest of the world, a crisis-like atmosphere has begun to surround the Indian economy, potentially along with Indonesia. As the USD gains against many emerging market currencies, those countries with the weakest economic fundamentals are at most risk.
