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ICE Cotton Slips on Dollar Strength, But Posts Third Weekly Gain

16 Jan 2021 7:55 am
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Mumbai (Commodities Control) – ICE cotton futures edged lower in thin trade on Friday, hurt by a stronger dollar, although a recent bullish U.S. demand and supply outlook helped the natural fiber to post its third straight weekly rise.

The cotton contract for Mar 21 closed at 80.7 cents, down 45 points. Spot March cotton closed up 93 points on the week and 258 points on the month and year.

May 21 Cotton closed at 81.62 cents, down 38 points, Jul 21 Cotton closed at 82.37cents, down 38 points and Dec 21 Cotton closed at 77.02 cents, up 22 points.

The market will be closed on Monday for the U.S. holiday Martin Luther King Jr Day.

"The market is still reacting to what happened in the crop report," said Sid Love, commodity trading adviser at Kansas-based Sid Love Consulting, adding that with a holiday coming up trading was muted.

"The reduced crop size has certainly been a support and lower rural cotton supplies are also adding a little bit of a support. However, today the strength in the dollar is not helping."

The U.S. dollar rose 0.5% to a three-week high against key rivals, making greenback-denominated cotton more expensive for investors holding other currencies.

Earlier this week, the U.S. Department of Agriculture in its latest World Agriculture Supply and Demand Estimates (WASDE) report showed lower U.S. production and ending stocks for the 2020/21 crop year.

Meanwhile, CFTC data showed cotton specs reduced their net long by 1,010 contracts to 69,702 contracts on the week ending 12th January. Commercial’s net position was 144,177 contracts net short after 5,190 new longs were added.

On the technical side, "ICE futures should experience resistance near 80 – 81 cents and then in 100-point increments up to 85, basis March, over the near- to medium-term," said Louis Rose, director of research and analytics at Tennessee-based Rose Commodity Group, in a note.

Total futures market volume fell by 10,040 to 14,716 lots.Certificated cotton stocks deliverable as of Jan. 14 remained unchanged at 68,681 480-lb bales in the previous session.

Support and resistance for Cotton #2 lies at 80.08 cents and 81.74 cents per lb, respectively.

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