February 2, 2010

 

US Wheat Outlook on Tuesday: Seen Up 7-9 cents in technical bounce

 

 

U.S. wheat futures are expected to start stronger Tuesday in a technical bounce from recent losses, but traders said the upside looks limited.

 

Chicago Board of Trade March wheat is called to open 7 cents to 9 cents per bushel higher. In overnight electronic trading, CBOT March wheat climbed 9 1/2 cents to US$4.84 1/4.

 

The markets are in an oversold condition and due for a corrective bounce after tumbling during January, traders said. Wheat ended near unchanged Monday, despite support from outside markets.

 

CBOT wheat led the upside in the grain markets overnight, with corn and soybeans posting more modest gains. It seems that "a sort of 'relief rally' is underway" in the grains after January's selloff, according to AgResource Company.

 

The next downside price objective for bears is pushing and closing CBOT March wheat below solid technical support at the October low of US$4.59, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at last week's high of US$5.04, he said.

 

First resistance is seen at Monday's high of US$4.83 3/4 and then at US$4.95, the technical analyst said. First support lies at Monday's low of US$4.73 and then at US$4.65, he said.

 

Short covering and bottom picking helped support prices, traders said. Non-commercial speculative funds hold a large net short position in CBOT wheat futures and options.

 

However, it will be difficult to sustain rallies in wheat because of continued bearishness about large supplies and lagging export sales, an analyst said. The mentality in the markets is to sell rallies.

 

Weekly U.S. wheat export sales have picked up in the past two weeks, and weekly U.S. wheat export inspections issued Monday topped expectations. However, the U.S. has a lot of business to make up for because export sales had been lagging for months, an analyst said.

 

The demand front was mostly quiet overnight. Japan said it is seeking 85,000 tonnes of wheat, including 65,000 from the U.S., in a routine tender to be concluded Thursday for delivery April 1 to 13.

 

In other news, there are no significant threats to U.S. winter wheat during the next week, according to DTN Meteorlogix, a private weather firm. In wheat areas of Ukraine, meanwhile, temperatures turned "much warmer" during the weekend and melted some snow cover, especially in the south, the firm said.