Cotton futures rose to their highest level in six weeks on Tuesday as investor money poured into the commodities complex, with speculators attracted to fiber due to a recent rally and strong technical chart signals. The front-month May cotton contract on ICE Futures US gained 1.08 cents, or 1.7 percent, to settle at 66.42 cents a lb, after rising as high as 66.66 cents a lb, the highest for the front-month since February 23.
Tuesday marked cotton's third consecutive day of gains, its longest such streak since late February. The May contract pierced its 200-day moving average during the prior session, a bullish technical signal that attracted new investor buying.
"They're coming back into the agricultural space, and cotton's got the best chart," said Ron Lawson, a partner at commodity investment firm Logic Advisors in Sonoma, California.
The new buying, along with short-covering from traders who rolled their short positions forward, helped push the most-active front-month to a premium over the second-month July contract, resulting in a forward curve structure known as backwardation.
This benefits investors who can make money from holding contracts and rolling them forward into the next month.
Traders also looked ahead to the monthly US Department of Agriculture's (USDA) supply and demand report, expected on Thursday.
The USDA may raise its estimate for US exports from 10.7 million bales for the 2014-15 crop year, which ends in July, thanks to strong export sales, traders said.
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