Cotton futures surged to a strong close Friday as commercial and technical buying combined with strength in other commodity markets and the momentum from to 80.65 cents, dealing from 79.02 to 81.15 cents. Volume traded in the July contract at 3:09 pm (1909 GMT) was at 13,214 lots while December's tally was at 5,622 lots.
"It's a technical rally, but it's supported by sustained commercial buying below 70 (cents, basis July)," said Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana.
He said cotton futures have been pushed below 70 cents in the July contract around seven times over the past few weeks, but it has rebounded every time from commercial and trade fixation buying. "The downside has shown little potential," said Stevens, adding that a finish over 72 cents in the July contract should draw in a further round of investor buying over the next few sessions.
On a fundamental level, cotton market participants will be turning their attention to development of cotton crops in the United States especially if moisture levels are sustained in the key growing area of Texas, which is expected to plant half of the cotton in the country this season.
"Longer term, the record carry-in will weigh on (the) December (cotton contract) even as bulls look to a drawdown in ending stocks by next spring/summer," said a report by Sharon Johnson, cotton expert for First Capitol Group in Atlanta. Brokers Flanagan Trading Corp sees resistance in the July cotton contract at 72.50 and 73.40 cents, with support at 71.25 and 70.60 cents. Volume traded Thursday reached 11,758 lots, the exchange said. Open interest in the cotton market rose 1,185 lots to 256,512 lots as of May 15, it added.
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