Cotton Market Analysis - Jan. 24
Price action: March cotton futures fell 37 points to 120.38 cents per pound, the contract’s lowest closing price since Jan. 14
Fundamental analysis: Cotton futures fell for the third consecutive day on pressure from a stronger U.S. dollar and continued weakness in U.S. stocks. The S&P 500 index plunged as much as 4.0% to the lowest levels since mid-June amid escalating tension between Russia and the West over Ukraine. The U.S. dollar index rose to a two-week high. A stronger dollar makes U.S. commodities more expensive for foreign buyers. Other bearish influences for cotton today included a drop in crude oil and expectations the Federal Reserve will tighten interest rates aggressively to control inflation.
Cotton prices remain supported by expectations for strong demand and smaller global supplies. USDA’s next weekly export sales report Jan. 27 will offer an update on the pace of demand. On Friday, USDA reported net U.S. cotton sales for the week ended Jan. 13 at 273,000 running bales (RB), up 12% from the average for the previous four weeks. USDA also reported weekly sales of 139,200 RB for 2022-23.
Large speculators increased their net long position in cotton futures and options by 844 contracts, to 77,608, in the week to Jan. 18, data from the Commodity Futures Trading Commission showed.
Technical analysis: Cotton futures bulls still have a near-term technical advantage with prices trending up since early December, though momentum has slowed as prices fell the past three sessions. Upside objectives for bulls include closing March futures above the contract high at 124.78 cents, posted last week. Initial support is seen at the 10- and 20-day moving averages at 119.44 cents and 116.62 cents, respectively.
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