April 16, 2008

US Wheat Outlook on Wednesday: Seen higher on overnight follow-through

U.S. wheat futures are poised to start Wednesday's day session mostly higher on technical buying and follow-through strength from the overnight, traders said.

Benchmark Chicago Board of Trade May wheat is called to open 5 to 10 cents per bushel higher. In overnight electronic trading, CBOT May wheat jumped 11 cents to US$9.06 3/4.

Follow-through buying from the overnight should help support wheat early in the session, along with the weak U.S. dollar and a record-breaking rally in crude oil, a CBOT floor trader said. Weakness in the dollar is seen as bullish for commodities because it gives foreign importers more buying power.

Wheat will keep an eye on the neighboring and outside markets as it is seen as a follower, a trader said. CBOT corn was firmer overnight, while soybeans were slightly weaker.

World demand and export restrictions remain fundamentally supportive for wheat, the trader said. Argentina has extended the closure of its wheat export registry, while Kazakhstan has imposed a ban on wheat exports until Sept. 1.

Traders will continue to watch the weather amid a lack of other fresh news, an analyst said. Rainfall in the U.S. Plains this week favors the central and east areas, although moisture is most needed in the southwest, especially in Texas, DTN Meteorlogix said.

In China, recent rain activity will favor jointing wheat, Meteorlogix said. The region may see more beneficial shower activity during this coming weekend, the private weather firm said.

The bulls' next upside price objective is to push and close CBOT July wheat, which represents the new crop, above solid technical resistance at US$9.50, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at this week's low of US$9.00.

First resistance is seen at US$9.23 and then at Tuesday's high of US$9.40. First support lies at Tuesday's low of US$9.10 and then at US$9.00.