Cotton tests $73 resistance zone ahead of today CoT report 📊

Cotton futures are testing the $73 per bale area, ahead of today's Commitment of Traders (CoT) report, which will be released at 8:30 PM BST. Also, wheat, corn and soybean may be volatile ahead of or after the report.

• Higher oil should support cotton prices (lowering demand for its substitute, polyester), but on the other hand, a stronger dollar is not good for cotton
• So far, the market has not priced in particularly optimistic stimulus treatments in the Chinese economy, which in theory should be a positive driver for prices
• It's still unclear how much damage Hurricane Helene did to U.S. crops (the USDA WASDE report isn't due until October 11); behind-the-scenes talk is of as much as 300,000 to 500,000 bales of crop loss 
• Another Hurricane Kirk is currently forming in the Atlantic and is likely to reach the US East Coast on Sundays
• Bad weather circumstances for US cotton (Mississippi Delta, Georgia, Florida) came at the worst time i.e. harvest season

The latest CoT report indicated further indecision in the cotton market; Managed Money positions indicate a similar sized increase in both long and short positions, while Commercials (hedgers) continue to hedge against price declines. This time, the withdrawal of a sizable amount of short positions from Commercial investors and fund managers could provide some positive signal for cotton, perhaps heralding a structural change, ahead of a further upward trend. For the moment, however, investors are clearly undecided and are waiting for a 'signal' that will either provide new fuel for the uptrend, or pull prices back to the $70 per bale area. Along the way of the 'bounce' from the $67 per bale level, cotton has managed to defend increases several times, resisting strong downward impulses. The key psychological support zone is $70 per bale.

Source: xStation5

The latest CoT report. Source: CFTC