January 6, 2009

 

US Wheat Outlook on Tuesday: Seen up on spillover, technical buying

 

 

U.S. wheat futures are poised to rise at the start of Tuesday's day session on technical buying and borrowed strength, although an analyst said the markets are due for a correction after recent rallies.

 

Chicago Board of Trade March wheat is called to open 4 to 6 cents per bushel higher. CBOT grains and soybeans rose in overnight electronic trading, with March wheat gaining 5 cents to US$6.21 3/4.

 

CBOT soybeans led the upside overnight and advances in the neighboring market should help lift wheat in early dealings, traders said. Fund buying and gains in crude oil are seen adding support, they said.

 

Technical buying also should be supportive, as wheat has upside momentum following recent rallies, analysts said. CBOT March wheat overnight hit a fresh three-month high of US$6.23 1/4.

 

"Bulls have gained fresh upside near-term technical momentum as a four-week-old uptrend is in place on the daily bar chart," a market technician said.

 

However, wheat is due for a break following a run-up of nearly US$1.50 from Dec. 5 to Monday's close, an analyst said.

 

"I think we're still in the uptrend, but I'd like to see this thing correct a little bit," he said.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at last week's low of US$5.84 3/4, the technician said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$6.50, he said.

 

First resistance is seen at Monday's high of US$6.19 1/2 and then at US$6.25. First support lies at US$6.00 and then at Monday's low of US$5.96 1/4.

 

In export news, Jordan said it is tendering to buy 100,000 metric tonnes of wheat of optional origin, on a cost and freight basis. The wheat is for shipment during April and May, and the deadline for bids is Jan. 21.

 

Japan said it was seeking 127,000 metric tonnes of wheat, including 106,000 from the U.S., in a tender to be concluded Thursday. The shipment is expected to arrive between March 5 and April 5.

 

India, meanwhile, should produce about as much wheat in 2009 as it did in 2008, despite variable weather and sowing delays, an Agriculture Ministry official said. Production in 2008 was estimated at 78.4 million tonnes.