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Rumors China Short on Cotton Supports Uptrend


Since recovering from a 5-month low in early December, cocoa prices have seen choppy action and have had difficulty sustaining upside momentum. While the market has returned to the lower portion of its trading range, cocoa has found decent support at these price levels.


While coffee has only had one positive daily result so far this week, it has been able to avoid a long liquidation washout from this year’s commodity index fund rebalancing. With the market on-track for a positive weekly reversal from Monday’s 7-week low, coffee can lift further above the 50-day moving average.


March cotton closed lower yesterday but stayed within the range of Tuesday’s breakout rally. Traders were disappointed by the weekly export sales report, which showed net cotton sales at their lowest level since November 11. The Dow and S&P 500 were both lower, and the dollar was higher, and both these moves were negative for cotton. Shipments to China have reached 797,100 bales versus 2.639 million a year ago. They have slipped below the five-year average of 910,000 bales, even though their purchases are well above average.


Sugar prices have been unable to find their footing after falling below their 200-day moving average, but are approaching technically oversold levels. With key outside markets showing strength, sugar should be closing in on a near-term low.

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