June 9, 2009

 

US Wheat Outlook on Tuesday: Seen firmer on rebound, outside support

 

 

U.S. wheat futures are poised to start higher Tuesday in a rebound from recent losses, although a slide Monday inflicted some technical damage, traders said.

 

Chicago Board of Trade July wheat is called to open 5 to 7 cents per bushel higher. In overnight electronic trading, CBOT July wheat advanced 6 cents to US$6.04.

 

Wheat is expected to bounce back a bit in a "Turnaround Tuesday" scenario after falling Monday and Friday, traders said. Strength in outside markets, including crude oil and equities, and weakness in the U.S. dollar should help support gains, they said.

 

There was not much fresh fundamental news out overnight, and adequate global supplies continue to hang over the markets, traders said. Demand for U.S. wheat is seen as "anemic," a trader added.

 

On the technical side, CBOT July wheat suffered some damage from a 23-cent slide Monday, a CBOT floor trader said. Bears "now have the near-term technical advantage as a five-week-old uptrend line on the daily bar chart has been penetrated on the downside and negated," a technical analyst said.

 

The next downside price objective for the bears is pushing and closing CBOT July wheat below solid technical support at US$5.63 1/4, he said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$6.50, he said.

 

First resistance is seen at US$6.15 and then at US$6.25, the technical analyst said. First support lies at US$5.95 3/4 and then at US$5.75, he said.

 

Overnight gains should be viewed as a "selling opportunity," with resistance in CBOT July wheat seen at US$6.10 1/2, FuturesTechs said in a note. Trend support is at US$5.89 1/2, "so it's a break here that'll keep the momentum going in the bears'" favor, the firm said.

 

Some positioning is expected ahead of U.S. Department of Agriculture crop reports due out at 8:30 a.m. EDT Wednesday. The government is slated to issue updated estimates on 2009 U.S. winter wheat production and on old- and new-crop U.S. wheat carryout.

 

The USDA, in its weekly crop progress report Monday, rated 44% of winter wheat as good-to-excellent, down 1 percentage point from last week. Five percent of the crop was harvested as of Sunday, down from 8% last year and the average of 10%.

 

U.S. spring wheat was 96% planted as of Sunday, down from 100% last year and the average of 100%, the USDA said. The crop was rated 72% good-to-excellent, up from 63% last year.