The global market of cotton has been rallying since last week. How can this price behavior be explained?
To some extent, the situation is clarified by the latest cotton report published by the USDA. This report hints at the future situation in the next agricultural year (it starts on August 1st in many cotton-producing countries).
So what did the USDA report tell us?
The production of cotton declined from 118,015 million bales down to 116,383 million bales during the reporting period. The major losers are the USA and China.
The global consumption of cotton is almost unchanged. Still, it may see a boost at the expense of Indonesia (by 50K bales, which is an insignificant factor).
The import and export of cotton remained unchanged during the reporting period as well.
Another bullish factor supporting cotton prices worldwide is unfavorable weather conditions in Texas and Georgia. Bad weather also affects Chinese crops. Still, all the factors are not critical. Obviously, there are some concerns but the global market is too oversupplied to let the price initiate a major rally.
Technically, the price is currently fluctuating around the top of the price range, i.e. near a strong level of resistance, which is $92,6.
According to the Commodity Trading Department of Masterforex-V Academy, the price is unlikely to break and consolidate above the mentioned level. The latest 2 bars indicate low trading volume. If there is a break above it, this would probably be a spike with a sharp return below the level .
