March 26, 2010

 

US Wheat Outlook on Friday: Seen steady-firmer after rising overnight

 

 

U.S. wheat futures are expected to start steady to 2 cents per bushel higher Friday as the markets keep an eye on the row crops for direction and attempt a bounce after setting contract lows.

 

In overnight electronic trading, nearby Chicago Board of Trade May wheat edged up 1 1/4 cents, or 0.3%, to US$4.67 3/4.

 

Wheat in overnight trading trailed gains in CBOT corn and soybeans. Wheat fell with the neighboring markets Thursday and is "getting pulled along by the row crops," brokerage firm Country Hedging said in a note.

 

Gains in wheat Friday would follow Thursday's drop to new contract lows at the CBOT, Kansas City Board of Trade and Minneapolis Grain Exchange. It is fundamentally bearish that world supplies are large and that there is stiff competition for export business.

 

Thursday's losses were mainly due to technical selling, a CBOT floor trader said. Traders "beat the pants" off the markets and kept prices well below major moving averages, he said.

 

Non-commercial speculative funds continue to hold a large net short position in CBOT wheat, which leaves the market vulnerable to short-covering. However, the risk of sharp short-covering rallies is lessened because the markets are below key technical trading levels, the CBOT trader said. The 10-day moving average for CBOT May wheat is near US$4.82 1/2, and the 50-day moving average is at US$5.00 1/2.

 

CBOT May wheat's next big downside price target is US$4.39 1/4, and the contract faces bold upside resistance at US$4.76 3/4, according to FuturesTechs. The technical analysis firm said it had "no problem at all staying bearish" in the market.

 

Another technical analyst said the next downside price objective for bears is pushing and closing CBOT May wheat below solid technical support at US$4.50. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.00, he said.

 

First resistance is seen at US$4.72 and then at US$4.80, the technical analyst said. First support lies at Thursday's contract low of US$4.64 1/2 and then at US$4.60, he said.

 

Signals from outside markets look supportive for the grains Friday, a CBOT floor analyst said. Weakness in the U.S. dollar and strength in crude oil and precious metals set a firmer tone, he said.

 

There could be position-evening ahead of the weekend as traders wait for the U.S. Department of Agriculture to issue its prospective planting and quarterly grain stocks estimates March 31, the floor analyst said. Trading is expected to be choppy in light volume.