ICE cotton rose to a more than one-month high on Tuesday due to investor bottom-picking in the broader commodities complex, a drop in the US dollar, and buy stops hit as prices surpassed key technical and psychological levels. The most-active March cotton contract on ICE Futures US gained 1.56 cents, or 2.6 percent, to settle at 61.45 cents a lb after rising as high as 61.51 cents, its highest level since December 31. It was the front-month's largest single-session gain since November 26.
Fibre has now risen in six of the previous seven sessions after hitting a near 5-1/2-year low of 57.05 cents a lb on January 23, driven by speculator short-covering and a string of strong weekly US export sales reports. On Tuesday, the strong gains were more likely driven by investor buying across the commodities complex, traders said, pointing to recoveries in the crude oil and grains markets.
"Maybe the hedge funds are moving away from their chicken little and back to chasing commodities," said Peter Egli, director of risk management at British merchant Plexus Cotton Ltd. "It's a general allocation back into commodities, it seems." A drop in the US dollar against a basket of currencies to its weakest level since January 22 also buoyed cotton, traders said. A weaker dollar boosts greenback-traded commodities, like cotton, by making them cheaper to holders of other currencies.
The March cotton contract received support from 50-day moving average at 59.93 cents a lb, and as it rose exceeded key psychological levels, such as 61 cents a lb, triggering buy-stops and exaggerating gains, traders said. "Every time you hit a round number you get some fixations," said Jordan Lea, chairman and co-owner of Eastern Trading in South Carolina.