ICE cotton futures gained for a fourth straight session on Monday, rising 1% as an improved technical picture and optimism around a US-China trade deal triggered buying interest in the natural fiber.
Cotton contracts for March rose 0.64 cent, or 0.94%, to 68.60 cents per lb by 12:50 p.m. EST (1750 GMT). It rose to 68.75 cents earlier in the session, its highest level in over six months.
“Prices have broken all the key moving averages. So you've got the managed funds going long on cotton. That is what is driving the cotton market," said Ed Jernigan, chief executive of Jernigan Global, a cotton textile supply chain manager.
Prices were trading above key technical levels including the 100-day and 200-day moving averages. Speculators who trade on technical signals regard a break above key moving averages as a bullish sign.
ICE cotton speculators trimmed their net short position by 8,346 contracts to 3,958 in the week to Dec. 17, data from the US Commodity Futures Trading Commission showed.
“Right now the cotton market expects that the trade agreement with China will be done and will be signed and cotton will have an allocation in it," Jernigan said.
On the trade front, US President Donald Trump said the US had achieved a “breakthrough" and that a trade deal with China would be signed “very shortly".
China said on Monday it would lower tariffs on products ranging from frozen pork and avocado to some types of semiconductors next year.
Optimism around the trade negotiations has lifted cotton prices more than 20% since touching a more than three-year low in late August.
Certificated cotton stocks deliverable as of Dec. 20 totalled 12,550 480-lb bales, down from 13,068 in the previous session.
Total futures market volume fell by 8,507 to 19,294 lots. Data showed total open interest gained 1,482 to 208,828 contracts in the previous session.