Cotton futures finished sharply higher Thursday, lifted by technical factors during a session in which they got support from a weaker U.S. dollar.

Most-active December cotton rose 202 points to 61.13 cents a pound, while October rose 211 points to 59.11.

Technically, a bounce occurred when December cotton held support in the 58.50-cent to 58.60-cent area on Wednesday, analysts said.

As prices rose, buy stops were triggered above the high from Wednesday, said Mike Stevens, analyst with Swiss Financial Services. The upper end of Wednesday’s inside-day range for December cotton was 59.80.

“It’s technical in nature, because the market has performed so well this week relative to the other markets,” Stevens said. “You’ve got a double bottom and then started to take out previous highs. The market looks very good technically.

“It was encouraged greatly by the sharp drop in the U.S. dollar,” he added.

As cotton was closing, the September dollar index was down 1.059 points to 79.955.

The combination of the softer dollar and higher equities enabled cotton to shake off lower-than-forecast weekly export-sales data, said Boyd Cruel, senior softs analyst with Aaron Trading. The September S&P 500 futures were up around 10 points as cotton closed.

Net weekly U.S. export sales were 46,700 running bales, when expectations had been for around 125,000, Cruel said.

“They were disappointing numbers,” Cruel said. “However, the weaker dollar and strength in the equity market is giving this market some underlying support.”

The close above 60.49 (Tuesday’s high) portends a near-term target of 62.60 to 63.75 (the May 12 high), Stevens said. “In my opinion, it will take two consecutive closes above 62.60 to signal a move to 65,” he added.

One event that traders are awaiting is Friday’s release of the U.S. Department of Agriculture’s cotton export estimate for the 2009-10 crop year. The average of analysts’ estimates for 2009-10 U.S. cotton exports was 11.07 million 480-pound bales, according to a Dow Jones Newswires survey.

Cotton open interest rose 71 lots Wednesday to 113,338, ICE reported.

Cotton electronic volume Thursday as of the settlement was estimated at 10,148 lots, ICE said. In options, around 4,117 calls and 3,505 puts were traded.

[source: futuresource.com]