After what appears to be a blow-off top at the end of March, cotton prices have since pulled back a bit and are now trading relatively sideways. In terms of directional bias in the cotton market, a neutral to slightly positive outlook will likely remain valid above the 88.80 low from 3/12 as price has yet to produce a significant structural breakdown. Price has recently found support from an intermediate-term ascending trendline and the next significant level to keep an eye on is around 93.41. This pivot represents resistance on the chart and could keep the recent strength in cotton in-check. If price can surpass this level on the upside, traders should use the 94.64 area as the next expected level of technical resistance in the way of price. As a result of the digestive environment that the cotton market has embodied over the past few weeks, momentum strategies could prove effective. Those looking to find an “edge” in the market should consider using momentum studies, such as the RSI, on various different time frames to identify potential trading opportunities in the market.
U.S. DOLLAR INDEX (NYBOT:DXM14)
The U.S. Dollar Index has mounted a bit of a rally over the past few sessions after producing a potential double bottom around the 79.373 area on the chart. Interestingly enough, price has recently rejected the 50% Fibonacci retracement level around 80.070 and has since pulled back off its recent highs. Local momentum remains positive above the 79.650 trough and the recent pullback in price could present bullish traders with a more favorable entry level. An argument for near-term support could be made at 79.865 as well as 79.830 before the 79.650 level becomes relative. There does appear to be a resistance band on the chart from 80.055 – 80.070, which will likely present the most difficulty to any advance in price. Above here, the next significant level of resistance doesn’t come into play until the 80.234 area on the chart. The market has been a bit choppy down at these levels as the dollar looks to build a base from here. Directional bias at these levels remains neutral with local momentum appearing to favor a bullish position.
Despite recent weakness in price, the soybean market still appears to be very strong from a technical standpoint, with price action continuing to make higher highs and higher lows on the chart. Soybean prices have been steadily trending higher since the end of January and the directional bias remains positive above the 1460’0 pivot. Further support can be seen in the form of a long term trendline, which has proven itself on several occasions over the past few months. This trendline intersects price around a previous technical level of structure at 1484’0, which will likely provide signficnat support to price heading into today’s session. Aggressive bulls could consider buying any weakness into this level anticipating support to enter the market. Regarding potential upside targets in the beans, traders should consider the 1525’0 and 1531’6 levels as valid upside targets. Above the 1531’6 peak, there is not much techncial resistance to prevent prices from probing higher.