By Keith Brown, DTN Contributing Cotton Analyst 

After jumping to new life-of-contract highs Wednesday and garnering no support from Thursday’s weekly export sales, the cotton market backed off Thursday. In a short-term sense, the market may be a touch “overbought,” meaning it has run too high, too fast, without a correction.

Another negative for the market is the strengthening U.S. dollar. It seems whenever COVID-19 infections or its variants rise, a small flight-to-quality happens towards the greenback.

Still, given cotton’s dynamic bullish trend, plus the fact the crop is not made, speculators are apt to support any decline. On tap for Friday will be the retail sales report, business inventories report and the CFTC’s Commitment-of-Traders data. Each report can be a defining “spoke” in cotton’s wheel.

The six- to 10- and the eight- to 14-day outlooks are signaling below-normal temperatures and above-normal precipitation for West Texas, as well as other parts of the Cotton Belt. Traders are beginning to divide along the lines that big rains mean a very strong crop, while others see the constant wet weather as being detrimental to cotton’s development.

Testimony from Fed Chair Jerome Powell indicated the current loose monetary policy would be maintained, despite a jump in inflation readings for June.

Heading into Friday’s session December cotton stands 1.57 cents higher on the week, 4.30 cents up on the month and 14.40 cents up on the year.

Thursday, December settled at 89.05 cents, down 0.76 cent, March ended at 88.60 cents, minus 0.58 cent and December 2022 closed at 79.92 cents, plus 0.01 cent; estimated volume was 29,963 contracts.