ICE Cotton Futures Test 70 Cents Pass The Bottom, Careful "Step On The Thunder".

Since May 15th, the main contract of ICE cotton futures has continued to rebound from a low of 64.50 (from July to the new low). The 28 day intraday was close to the 70 cent pass (high point 69.50), and the rebound rate was less than two weeks, reaching 7.75%. Traders, multi fund and speculators' confidence gradually recovered, and the disk and the market returned to rationality.

The industry believes that the main reasons for the recent ICE futures continued to rebound are as follows:

First, the external market is temporarily calm.

China and the United States have repeatedly increased tariffs and the escalation of trade wars have been constantly diluted. Both sides have announced that the talks have not broken down, and they have "opened the door" to wait for the other side, while the relationship between the US and Iran has eased; the adjustment of monetary policy of the Federal Reserve and central banks is not large.

Two, the ICE disk will be more affected by cotton fundamentals and technology in the short term.

On the one hand, in recent years, the major cotton producing areas in the United States, Texas and central and southern China have been subjected to continuous heavy rain and strong winds (such as torrential rain, tornadoes, hailstorms and strong winds) in the western part of the country. Not only the cotton planting progress has lagged behind, but also it has been extremely harmful to the emergence of seedlings; on the other hand, the ICE main force has not caused a lot of buying up in 65-67 (ON-CALL spot price contract is also very active), and the US cotton export contract has rebounded strongly, supporting ICE to stop rising.

The three is China's June or 800 thousand tons of quasi tariff cotton import quotas.

Despite the stalemate in the Sino US trade negotiations, the hope for us cotton to enter the Chinese market in 2018/19 6-8 months is rather slim. However, whether Chinese enterprises sign 2019/20 cotton or purchase cotton from other countries in 2018/19, it will aggravate the pressure of global cotton supply and stimulate ICE rebound.

Some institutions, international cotton traders and import enterprises believe that the bottom of ICE has ended, and the main contract will focus on 70, 72, 75 and other integer juncture. The trend of global cotton market has changed to many, to remind textile enterprises and middlemen to "stay idle".

However, the author believes that before the next two "landmines" do not have an explosion, we must be cautious in doing more. We should enter the market in batches and see the good results.

First, Sino US trade negotiations have not yet scheduled a timetable, and the risks remain unchanged.

If China and the United States finally reach an agreement and sign an agreement, it will be good for ICE, commodity futures and global bond markets. It does not exclude inflation or even skyrocketing. But if there is no room for maneuver, there will be no room for manoeuvre in the long 65-70 bottom.

Recently, the governor of the New York Fed said that the Fed did not need to raise or lower interest rates at present, but he was concerned about the evidence to prove the recent weak inflation, and the pressure on President Trump and investors to cut interest rates continued.

Industry analysis, at present, the Fed tends to adopt the "symmetrical inflation target".

Two years ago, even if inflation was lower than the target (2%), the Fed would continue to raise interest rates in order to prevent the asset bubbles. But now, this attitude has become that even if inflation is close to or more than 2%, the Fed can also be patient in raising interest rates, which is actually a disguised dove.