MUMBAI(Commoditiescontrol): The US cotton futures ended the week on a positive side on speculative buying however gains were limited post weak weekly export sales report.
The benchmark May contract settled at 82.09 cents/lb on Friday, increasing 0.9% over the week. Open interest as of March 1 showed 130,578 lots outstanding, up 3% from prior week at 130,578 lots.
The market closed higher four out five trade session as oversold technical and expectation of lower production for next season brought fresh buying. However, poor weekly export sales wiped nearly 60% of the total gains during the week. Net sales(upland+pima) touched 300,000 Running Bales(RB), lower 26% from prior week, while shipments reached 290,782 RB for the week ending Feb 22. (Full Report)
The on-call sales position as of Feb 22, showed 14.18 million bales(480lb), up 0.8% from prior week at 14.1 million bales. The current season two contract stood as follows, with May increasing 1.5% to 3.4 million bales and July rising 3.1% to 4.3 million bales.
The two current crop on-call sales combined showed that around 7.65 million bales need to be fixed in the next 4 months or 120 days which is a large position providing the much needed support to the market.
Cotton prices have found a good support at 75 cents and resistance at 84 cents with trend tilting towards the bull side.
Last summer the sentiment was quite bearish, as US and global production numbers were going up month after month and ROW ending stocks were at nearly 50 million bales in the July WASDE report.
The mood is more cautious at the moment, be it because of drought conditions in the US Southwest or China becoming a strong importer next season, after its strategic stocks have been reduced to manageable levels. There is also the fear of higher inflation, which has a lot of speculators excited about commodities.
Sell-side liquidity is the key and only speculators can provide it. Regarding a potential downside move we need to watch the financial markets, which have once again turned jittery this week after some comments by the Fed Chairman. This might trigger another round of spec long liquidation if the situation worsens, similar to what we saw in early February.
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Technical Ideas(May): Traders long and holding the same can revise up the stop loss to 80. Resistance will be at 83.21-85.60. The last peak was at 84.45. Further breakout and close above 84.45 is required to show a rally to 86 and 89. Support will be at 81.94-80.82- 80. Higher range is likely to attract resistance till the recent peak of 84.45 is not crossed on closing.
(By Commoditiescontrol Bureau; +91-22-40015534)
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