Cotton Soars On Increased Export Demand
???? Fundamentals
The nearly 2-year-old bear market in Cotton prices appears to be over, as old crop Cotton trades above 90-cents per pound. Strong U.S. exports are behind the price rally, with the USDA reporting U.S. Cotton export sales of 187,600 bales the current marketing year.
Among the leading buyers of U.S. Cotton was once again China, which continues to add to domestic stocks despite already ample supplies. Some traders were expecting China to be done with Cotton purchases, and several analysts expect China to start to move strategic supplies on to the domestic market, which would likely turn the world’s largest consumer of Cotton into a net-seller later this year.
New-crop Cotton contracts are also moving higher in price, as the market tries to buy back some acreage from Corn and Soybeans this coming season. With prices beginning to move in a parabolic state, we will need to see continued good export demand to keep the price momentum going, with any signs of Chinese buying starting to wane, sending weak longs to the exits.
???? Technical Notes
Looking at the daily chart for May Cotton, we notice prices moving straight up after spending about 3 weeks in a consolidation period that became the base for the recent explosive up-move.
The 14-day RSI is now well into overbought territory, with a current reading of 81.33. Prices have started to move parabolic, and we are seeing a bit of a drop-off in trading volume, which may be a sign that the current up-leg is short-covering in nature and not as much fresh buying as bulls would like to see. 95.00 looks to be the next resistance level for May Cotton, with support found at the 85.24 high recorded during the recent consolidation period.
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