Since early June, the contract price of Zheng Cotton CF2209 has fallen into the range of 20,000-20,700 yuan/ton. Cotton traders and Xinjiang cotton processing companies with high hedging rates have increased their efforts to place orders and arbitrage shipments. Raw material stocks are low. Cotton spinning enterprises and middlemen also replenished their stocks at low prices at the right time.
As of now, the sales progress of Xinjiang cotton in 2021/22 is still significantly stagnant, significantly lower than the level of the same period in the previous year. The wait-and-see sentiment in downstream procurement has once again heated up. Some institutions and cotton-related companies believe that once the main force of Zheng cotton effectively breaks through the 20,000-strong At the pressure level, the next target may go straight to 18,600 yuan/ton.
What factors continue to put pressure on Zheng Cotton’s market in the short term and undermine the confidence of bulls? Industry analysis mainly includes four points:
First, the United States officially implemented a ban on goods from Xinjiang on June 21, 2022, and the European Parliament recently passed the “Resolution on Anti-Forced Labor Customs Measures.” For Chinese cotton textile and apparel companies, the EU and the United States are very important exports The market has a greater impact on the company’s future orders.
Second, the Fed’s continued interest rate hikes have put pressure on the commodity futures market. The Federal Reserve’s June interest rate meeting ended early this morning. The latest interest rate decision was to raise interest rates by 75 basis points, which was basically in line with market expectations. This was also the first single 75 basis point interest rate hike since 1994. As the U.S. stock and bond markets have already digested the impact of this larger interest rate hike in advance during the recent plunge, the financial market has temporarily stopped falling and stabilized. However, the Federal Reserve stated that in order to control inflation, it will continue to raise interest rates and shrink its balance sheet in the future. This puts great pressure on the market.
Although Zheng Mian had a certain degree of resilience before, no eggs were left intact. Affected by the greater interest rate hike and balance sheet reduction, Zheng Mian directly fell below the 20,000 mark, and this important support line was broken. This means that the downward space has been opened, and Zheng Mian has entered the price range starting with “1”.
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