Cotton futures ended higher on Thursday, supported by outside market strength linked to a new bond-buying program in Europe aimed at containing the region's debt crisis. Cotton futures were swept up in a broader-based rally that saw the S&P 500 index surge to its highest level in more than four years and the Nasdaq climb 2 percent on news that the European Central Bank will undertake an aggressive bond-buying program to help struggling euro zone countries.
The macro picture improved further after US data showed companies added staff in August at the fastest clip in five months and a gauge of employment in the service sector also brightened, helping cotton futures post their first positive settlement in three trading days.
The benchmark December cotton contract rose 0.64 cent to finish at 75.99 cents per lb, after dealing between 74.80 and 76.19 cents. "We have the outside markets today to thank for that," Knight Futures cotton analyst Sharon Johnson said of cotton's close higher. But whether the cotton market extends the move could depend once again on the outside markets, and their reaction to Friday's US payrolls report.
The median of forecasts from economists polled by Reuters is for US employers to have added 125,000 jobs in August, down from 163,000 new hires in July. "Come 8:35 (a.m. EDT) tomorrow morning we will see if the employment data helps or hurts our case," Johnson said.
Looking at the technicals, the market's inability to break above its intra-day high at 76.19 cents, a price-point that corresponds with the 10-day moving average, suggests sellers remain motivated to contain any rally. "It is showing that we have some resistance at those highs, banded by the 10-day moving average," Johnson said. ICE cotton futures volumes stood above 14,500 lots in late New York business, nearly 40 percent below the 30-day norm, according to preliminary Thomson Reuters data.
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