April 30, 2008

 

US Wheat Outlook on Wednesday: Seen opening higher on technical bounce

 

 

U.S. wheat futures are expected to start Wednesday's day session modestly firmer in a bounce from Tuesday's losses, traders said.

 

Chicago Board of Trade July wheat is called to open 3 to 5 cents per bushel higher. In overnight electronic trading, CBOT July wheat rose 2 1/4 cents to US$8.10 3/4.

 

Follow-through buying from the overnight should help wheat recover from Tuesday's sell-off, traders said. However, the markets could retreat again amid a lack of fresh bullish news, they said.

 

The number of bears in the market seems to be increasing amid expectations that the world will produce a big world wheat crop, a CBOT floor trader said. Growers are thought to have expanded plantings due to high prices.

 

There are no major weather concerns for wheat heading toward harvest in the Northern Hemisphere, although the U.S. still has the potential to see cold snaps in U.S. winter wheat areas, an analyst said. Industry members "need to keep an eye out for any unusual cold weather systems" in the U.S. central and southern Plains, DTN Meteorlogix said in a forecast.

 

Rain and cold weather are expected to hit crop areas of the U.S. Delta on Friday and this weekend, Meteorlogix said. The weekend weather does not appear to be cold enough to harm heading to flowering wheat, but it does bear watching, the private weather firm said.

 

In the U.S. northern Plains, rainfall continues to build moisture to support growth of recently planted spring wheat, Meteorlogix said. Cold weather could threaten some newly emerged wheat during the weekend and on Monday, the weather firm said.

 

In other news, the markets are waiting to see whether the Federal Reserve cuts interest rates. Traders want to see how the Fed's decision, due out at 2:15 EDT, affects the U.S. dollar. A weak greenback is seen as bullish for U.S. commodities as it gives foreign importers more buying power.

 

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$8.50, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below psychological support at US$8.00.

 

First resistance is seen at US$8.25 and then at Tuesday's high of US$8.40. First support lies at US$8.00 and then at the January low of US$7.74.