March 18, 2009
US Wheat Outlook on Wednesday: Seen lower in setback, awaiting Egypt
Profit-taking is expected to drag U.S. wheat futures a few cents lower at the start of Wednesday's day session, with traders waiting for results of an Egyptian tender.
Chicago Board of Trade May wheat is called to open 1 to 2 cents per bushel lower. In overnight electronic trading, CBOT May wheat lost 2 cents to US$5.50 1/2.
Wheat is due for a bit of a pullback after climbing the previous two days, although the markets look technically stronger after the rallies, an analyst said. CBOT May wheat was up 34 1/4 cents on the week as of Tuesday's close.
Technical momentum is "with the bulls, who can now look confidently in the direction of US$5.68 and US$5.84 1/4" for CBOT May wheat, according to FuturesTechs. With a close at US$5.52 1/2 on Tuesday, "it's fair to say that we got what we were looking for from the bulls," the firm said in a note.
The next downside price objective for the bears is pushing and closing CBOT May wheat below solid technical support at US$5.11 1/2, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.75, he said.
First resistance is seen at US$5.54 3/4 and then at US$5.70. First support lies at US$5.44 3/4 and then at US$5.30, the technical analyst said.
"A 2.5-month-old downtrend on the daily bar chart has been negated this week," he said. "Prices are now in a two-week-old uptrend on the daily chart."
It remains supportive that trend-following speculative funds are net short in CBOT wheat, a trader said. Ongoing worries about dryness in the U.S. central and southern Plains are also seen as friendly, he said.
The Plains should remain mostly dry through the end of the week, but a few light showers are possible Friday through Sunday, private weather firm DTN Meteorlogix said. The weather bears watching, but it's too soon to become overly bullish because wheat is known for its ability to grow in adverse conditions, said Dennis Gartman Publisher of the Gartman Letter.
"One might not wish to become bullish at this point, but the point of being bearish has rather obviously long passed," he said.
Traders are waiting to see the results on an Egyptian tender for 55,000 to 60,000 tonnes of wheat. Issued Tuesday after the close of trading, the tender seeks wheat on a free-on-board basis for shipment April 10-20.
