Cotton futures rallied to a strong finish Thursday on investment fund buying, and follow-through interest should spark a further advance in fibre contracts this week and next, brokers said. The key March cotton contract gained 2.53 cents to finish at 48.53 cents per lb, trading between 45.62 and 49 cents. It was the highest close for cotton on a spot daily basis in a week.
Volume traded in the March contract was at 10,771 lots at 3:08 pm EST (2008 GMT). The May contract increased 2.21 cents to end at 49.11 cents. Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana, said that once the March contract held the Wednesday low of 45.58 cents, "players just flipped to the long side."
He said the close over 48 cents in the March contract meant it would have the momentum to "move to 50 cents." Traders said there was nothing fundamental behind the rally, but the short-covering also meant that a low in cotton prices now seems to be in place. There was also little reaction to the US Agriculture Department's weekly export sales report.
USDA said total US cotton sales stood at 125,000 running bales (RBs, 500-lbs each), compared with 226,000 RBs in last week's data and trade expectations it would run from 150,000 to 200,000 RBs. US cotton export shipments hit 200,200 RBs, against last week's 194,900 RBs and trade estimates it would hit around 200,000 RBs.
Analysts said with a near-term low seemingly in place, more consumer buying may be seen in cotton as importers book orders for fiber that is still below 50 cents. Brokers Flanagan Trading Corp said it sees resistance at 48.95 cents, with support at 48 and 47.15 cents. Volume traded Wednesday reached 10,409 lots, exchange data showed. Open interest in the cotton market was at 129,592 lots as of January 14 from 129,553 lots in the previous session, it said.
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