A low of 76.09 cents per pound—the weakest since June 11—was quickly reversed on Thursday as ICE cotton futures staged a V-shaped rebound. The December contract settled at 76.97 cents, up 0.71 cent or 0.93 percent.
This rally caught many shorts off guard, but its drivers were tactical rather than fundamental. Three factors converged: a weaker US dollar ending a three-day winning streak, technical buying by speculative funds, and a jump in crude oil prices tied to Middle East tensions.
Dollar Weakness: A Temporary Boost for Export Competitiveness
The dollar index slipped after US economic data tempered expectations for a Fed rate hike this year. A softer dollar makes dollar-denominated cotton cheaper for overseas buyers, theoretically aiding US export competitiveness.
Yet the impact remains largely psychological. USDA’s weekly export sales report showed net sales of 83,864 running bales for the current marketing year—down 53 percent from the prior week and 61 percent below the four-week average. Combined with 67,089 bales for the next season, total commitments of roughly 150,000 bales remain subdued.
Currency-driven cost advantages have not yet translated into real order growth.
Technical Buying and Oil Linkage: A Short-Term Safety Net
StoneX senior vice president Bailey McHenry attributed the rebound to "technical repositioning" by speculative funds after heavy selling the previous day. The 76-cent level appears to be a strong support zone where buyers are willing to step in.
Meanwhile, crude oil rose over 2 percent after a vessel was attacked near Oman, reigniting concerns about shipping safety in the Strait of Hormuz. Higher oil prices raise the cost of polyester—cotton’s synthetic substitute—theoretically improving cotton’s relative competitiveness.
However, this transmission mechanism is slow. Near term, oil’s influence on cotton is more about sentiment and fund flows than immediate mill-level substitution.
Fundamentals Remain Weak: Export Data Tells the Real Story
While futures rallied, the physical market showed no such strength. The Cotlook A Index fell 250 points to 85.05 cents per pound, indicating thin trading and buyer caution.
US cotton export shipments totaled 300,155 bales for the week, up 20 percent from the prior week but still 16 percent below the four-week average. Shipments to China were just 12,248 bales, well below peak-season levels. As the world’s largest cotton importer, China’s muted buying is a clear bearish signal.
Implications for Buyers and Traders
Cotton prices are caught in a narrow range with support near 76-77 cents and limited upside due to weak demand.