If you do a network test in Advanced | Network Setup, does it pass? If it does not I would suggest contacting your Hosting company as it looks like the FTP time out is too short and causing the disconnect with the server.
Before going to the hosting company check in the Network Settings pane to see if you have 'Use Enhanced FTP' selected, if not select it and then click on the 'FTP Options...' button you see on the right hand side. Under 'Silent Running' select enabled, click on OK and then on Apply in the Settings window and then try a test, if this still fails then you have to take it up with the hosting compant and get them to increase the FTP timeout.
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