Cotton on MCX settled up by 1.37% at 21450 due to expectation of export demand to China. Though, some gains were limited on good arrivals from major producing belts. The cotton trade body maintains a higher crop size of 34.1 against 33.8 million bales, prices are unlikely to cool off in the near future. With an opening stock of about 4.5 million bales at the beginning of the 2016-17 season, the Cotton Association of India (CAI) has projected a total demand of 29.5 million bales for the year, against 38.2 million bales last year. CAI's estimates put available the surplus at 11.2 million bales. However, looking at the trends in cotton arrivals at mandis, as much as 70 per cent of the crop is believed to have already hit the market. Meanwhile while Global prices are expected to trade with weakness as pressure The Chinese government announced that it will only revise its target price for cotton in the top-growing region of Xinjiang once every year. The government had previously been lowering the price on a yearly basis, effectively cutting farmer incomes and discouraging plantings. China has announced that it will set its target price for cotton in (the country's largest growing region) every three years. Prices are getting support at lower levels as Exports are likely to be around 5-5.5 million bales with the main destinations being Vietnam, Bangladesh and Indonesia, also forecast of an El Nino at the beginning of the monsoon will support prices. Technically market is under short covering as market has witnessed drop in open interest by -19.65% to settled at 2690 while prices up 290 rupees, now Cotton is getting support at 21246 and below same could see a test of 21043 level, And resistance is now likely to be seen at 21566, a move above could see prices testing 21683.

Trading Ideas:

# Cotton trading range for the day is 21043-21683.

# Cotton prices ended with gains due to expectation of export demand to China.

# The cotton trade body maintains a higher crop size of 34.1 against 33.8 million bales, prices are unlikely to cool off in the near future.

# The Chinese government announced that it will only revise its target price for cotton in the top-growing region of Xinjiang once every year.

# Cotton prices in spot market gained by 140.00 rupees and settled at 20960.00 rupees.