March 18, 2008

 

US Wheat Outlook on Tuesday: Stronger start seen on firmer overnight

 

 

U.S. wheat futures are poised to start Tuesday's day session firmer in a rebound from limit-down losses and amid some stabilization in outside markets, traders said.

 

Chicago Board of Trade May wheat is called to open 10 to 15 cents per bushel higher. In overnight electronic trading, CBOT May wheat rose 12 1/4 cents to US$11.43 3/4.

 

There are ideas that wheat is oversold and due for a technical bounce after contracts ended limit down, or 60 cents lower, on Monday, a CBOT floor trader said. Strength in outside markets like crude oil and gold may take the edge off of jitters about the health of the U.S. economy, analysts said.

 

However, there are still concerns about economic weakness. Market participants are waiting to see how much the Federal Reserve cuts the Fed funds rate. The decision is expected at 2:15 p.m. EDT.

 

Wheat also could feel some spillover pressure from losses in CBOT soybeans and corn, which are called to open lower, a trader said. Wheat tried unsuccessfully to resist a sell-off in neighboring markets Monday, he said.

 

Trading should remain volatile, with volume expected to be relatively light, a CBOT trader said.

 

"You're going to see a similar type trade today" as Monday, he said. It's going to be "very quiet, thin and wicked."

 

The bulls' next upside price objective is to push and close CBOT July wheat, which represents the new crop, above strong technical resistance at Tuesday's high of US$11.65, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at US$10.50, he said.

 

First resistance is seen at US$11.25 and then at US$11.50. First support lies at US$11.00 and then at US$10.87.

 

At the Kansas City Board of Trade, bulls' next upside price objective is pushing and closing July wheat above psychological resistance at US$12.00, the technical analyst said. The bears' next downside objective is pushing and closing prices below psychological support at US$11.00, he said.

 

First resistance is seen at US$12.00 and then at today's high of US$12.25. First support is seen at US$11.50 and then at US$11.25.

 

A more active weather pattern for the U.S. central and southern Plains during the next 10 days will improve soil moisture conditions for the hard red winter wheat crop, DTN Meteorlogix said. However, some dryness may continue over parts of West Texas, the Oklahoma Panhandle and far southwest Kansas, the private weather firm said.

 

Rains may be very heavy in some soft red winter wheat areas of the eastern Midwest and Delta during the next 24 to 48 hours, Meteorlogix said.