By Keith Brown, DTN Contributing Cotton Analyst 

The cotton market ended the first day of September mildly higher as USDA tabulators slightly downgraded the national crop, causing funds and speculators to buy. In fact, the spot market was one tiny tick from taking out its August high of 66.45 cents. Still failing to force a new high was discouraging and did send some bullish traders scampering. At any rate, the undertone of the market suggests the 2020 Crop is becoming smaller, with improving prospects for demand.

The U.S. dollar did an about face Tuesday, closing higher. In recent weeks the market had become grossly oversold, as trend-following traders have been pounding out new lows. Still, traders have recently been dialing in yet another stimulus package from Congress, resulting in additional selling of the dollar. However, to date that legislation has not been passed and that is causing short-sold traders to rethink their position, thus the dollar’s higher close.

Two big events on tap for the market will be this Thursday’s weekly export sales and Friday’s unemployment data. If there is a big jump in new jobs, then there will be incentive for the Federal Reserve to weaken interest rates.

The Chinese yuan has appreciated to its highest level against the U.S. dollar in more than a year. Currently the yuan is trading around 6.85 yuan to the Dollar. The strength of the yuan’s rally is thought to be based on the idea that the Chinese economy is recovering faster than the United States, following the COVID-19 lockdowns.

For Tuesday, December cotton closed at 65.40 cents, up 0.24 cent, March settled at 66.31 cents, up 0.26 cent and December 2021 finished at 65.90 cents, 0.46 cent higher. Estimated volume was 31,825 contracts.