May 2, 2008

 

US Wheat Outlook on Friday: Seen up, but markets face technical pressure

 

 

U.S. wheat futures are expected to start Friday's day session higher following gains overnight, although the markets could easily slip as it has done earlier this week, an analyst said.

 

CBOT July wheat is called to open 2 to 3 cents higher per bushel. In overnight electronic trading, CBOT July wheat closed up 1 cent at US$7.91 a bushel.

 

Wheat futures were up overnight, which usually indicates a higher opening, but this week the overnight numbers "mean nothing," said Vic Lespinasse, an analyst for grainanalyst.com. The wheat markets this week have stumbled in early dealings despite firmer trade overnight.

 

The upcoming harvest in the Northern Hemisphere is seen as bearish, analysts have said. The markets also look technically weak after recent setbacks.

 

CBOT July wheat Thursday closed lower and near the session low and hit another fresh 3 1/2-month low, as prices are still in a six-week-old downtrend on the daily bar chart, a technical analyst said.

 

"Bears still have solid downside technical power," the analyst said.

 

The bulls' next upside price objective is to push and close CBOT July wheat above solid technical resistance at this week's high of US$8.43, the technical analyst said. The next downside price objective for the bears is pushing and closing prices below strong technical support at US$7.50.

 

First resistance is seen at US$8.00 and then at US$8.14. First support lies at Thursday's low of US$7.77 and then at the January low of US$7.74."

 

Recent recovery in the U.S. dollar's relationship to the euro is seen as bearish, while gains in crude oil may lend strength to the grains, an analyst said.

 

Frost or a light freeze should be widespread in Kansas, Nebraska and Colorado this weekend, with a hard freeze possible in Colorado and western Nebraska, said DTN Meteorlogix. The freeze forecast doesn't pose a real threat to the crop, but the market may have to keep "a little damage premium because you never know for sure," Lespinasse said.

 

In other news, Argentine farmers' groups have said they will resume a strike Saturday. The resumption of farmer protests adds an unpredictable factor to the markets, an analyst said.

 

Pointing to the overnight decline in the CBOT July soybean contract, Lespinasse said, "If the market's not worried about it, I'm not worried about it." The U.S. could see an increase in soy export sales if Argentina's strike prevents export business.