US cotton futures ended up by their daily limit in light trade on Monday as the market seemed to be consolidating ahead of a possible shot at topside technical targets in the next few sessions, analysts said. Speculative fund buying powered the market as cotton defied a rise in the dollar to a two-month high versus the euro. A strong dollar normally pressures dollar-denominated commodities by making them pricier for holders of other currencies.
-- Market takes aim at nearby technical targets
The key March cotton contract on ICE Futures US climbed by the 4.00-cent daily limit to end at $1.1576 per lb, with the session low at $1.121. Volume traded was light at about 14,200 lots, nearly two-thirds below the 30-day average above 37,200 lots, preliminary Thomson Reuters data showed.
"Cotton is doing its own little thing today," said Mike Stevens, an independent cotton analyst in Louisiana. "It's going counter to the dollar. The market is bouncing from an oversold condition." Silver has moved ahead of cotton as the best performer in the Reuters-Jefferies commodity index for 2010, gaining 61.5 percent in the year to date versus cotton's 53.1 percent.
Cotton futures have lost about a quarter of their value since hitting a record high above $1.57 per lb in early November, basis the spot contract. The March contract may be heading for short-term technical targets, analysts said. Stevens said an extended bounce could lift March back toward $1.26 or $1.36.
The near-term target would be the 40-day moving average at $1.193. Traders said China's cotton market provided little, if any, inspiration. The May cotton futures on the Zhengzhou Commodity Exchange last traded at 25,130 yuan per tonne, up 425 yuan on the day.
Analysts said with most of the northern hemisphere cotton harvested, the focus would gradually turn after the New Year to possible spring plantings, especially in the United States. Analytical firm Informa Economics has raised its forecast for US cotton plantings in 2011 to 12.2 million acres, which would be a four-year high and up nearly 12 percent from 2010 cotton sowings of 10.909 million acres.
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