Cotton Market Analysis - Jan. 31
Price action: March cotton futures rose 381 points to 127.57 cents per pound, the highest settlement for a nearby contract since mid-2011.
Fundamental analysis: Cotton futures extended last week’s late upturn to reach the highest levels in 10 1/2-years behind strength in crude oil and U.S. stocks, and optimism over demand. The S&P 500 index was up about 1.5% late today as the market continued recovering from sharp declines earlier this month. Weakness in the dollar also supported cotton futures. The U.S. dollar index fell about 0.7% after surging last week to 19-month highs. A weaker dollar makes dollar-denominated commodities cheaper for foreign buyers.
Cotton price strength indicates traders expect to see continued strength in U.S. export demand. Last week, USDA reported net U.S. export sales for the week ended Jan. 20 at 391,300 bales for 2021-22, up 43% from the previous week and up 55% from the average for the previous four weeks. Speculators cut net long positions in cotton futures by 1,720 contracts, to 75,075 contracts, in the week to Jan. 25, CFTC data showed.
Technical analysis: Cotton bulls retain a solid near-term technical advantage as prices extended a steep, six-week uptrend, though March futures ended today at slightly over 73 on the Relative Strength Index, above the 70 reading typically viewed as overbought territory. Upside objectives for bulls include closing March futures above solid resistance at 140.00 cents. For bears, downside objectives include closing prices below solid support at 118.50 cents. Initial resistance is seen at today’s March contract high of 127.71 cents. Initial support is seen at the 10-day moving average of 122.52 cents and Friday’s intraday low at 120.01 cents.
Start a Pro Farmer trial for additional market analysis plus advice updates and recommendations.
