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Weekly: ICE Cotton Manages Positive Closing Amid Robust Export Sales, Weak Dollar; Experts Target 75+ Cents Ahead

30 Nov 2020 9:07 am
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Mumbai (Commodities Control) – The holiday-shortened week saw ICE cotton futures end nearly 2.2% higher during 23-27 November. NY Cotton rose 3.64% for the week ended 20th November.

On Friday, ICE Cotton futures saw gains of 73 to 99 points, in an abbreviated session after Thanksgiving holiday on Thursday, buoyed by a robust export sales report for the recent week and a sagging dollar.

USDA issued its export sales data Friday morning, delayed due to the observance of Thanksgiving. The U.S. Department of Agriculture's weekly export sales report showed net sales of 354,700 running bales (RB) for 2020/21, up noticeably from the previous week and up 84% from the prior 4-week average.

The ICE cotton futures for December 20 closed at 71.53 cents, up 73 points. March 21 Cotton closed at 73.35 cents, up 99 points and May 21 Cotton closed at 74.18 cents, up 97 points, while July 21 Cotton closed at 74.83 cents, up 94 points. Dec’20-Mar’21 spread stands at 182 points vs 208 points last week.

For the week, March’21 contract is 157 points higher for the week ended 27th November. During the week, the contract went as high as 74.30 Cents per lb.

The dollar index slipped to a near three-month low against its rivals. A weaker greenback makes cotton less expensive for buyers of the natural fiber in other currencies.

NY Cotton had a robust opening this week, as Cotton jumped more than 1% to a one-and-a-half-year high on Monday, supported by hopes for a potential COVID-19 vaccine and a rally in the grains market, while strong U.S. data added to the upbeat mood. In addition, South American weather continues to be essentially dry and that rallied the Chicago grains again.

However, ICE cotton futures fell more than 1% on Tuesday as investors booked profits ahead of the U.S. Thanksgiving holiday after the natural fiber hit an 18-month high on Monday. Another source for Tuesday’s selling was producer fixations. With USDA now reporting the 2020 crop is approaching 80% harvested, producers have become willing sellers of their crop above the 70-cent or higher mark.

Meanwhile, speculators’ liquidation extended on Wednesday too, ahead of the U.S. Thanksgiving holiday amid harvest progress and favorable weather conditions.

The weekly crop progress report from the U.S. Department of Agriculture (USDA) on Monday showed 77% of U.S. cotton was harvested, compared with 69% last week.

Earlier this month, the USDA in its monthly World Agriculture Supply and Demand Estimates (WASDE) report raised its projections for 2020/21 U.S. cotton production marginally to 17.1 million bales.

Meanwhile CFTC data for the week ended 24th November is delayed due to the Federal holiday this week. The data will be released on 30th November now. Last week, The Commitment of Traders report from CFTC showed a 1,529 contract reduction to managed money’s net long position. Cotton speculators were still 57,565 contracts net long on 17th November after the long liquidation. Open Interest for commercials dropped 11% on the week to a 7 week low 200,590.

According to Anton Kolhanov of Kolhanov.com, the uptrend may be expected to continue, while the market is trading above support level of 72 cents, which will be followed by reaching resistance level 75.40 cents per lb.

Immediate Support and resistance for Cotton #2 lies at 72.59 cents and 73.69 cents per lb, respectively.

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