June 15, 2009

 

US Wheat Outlook on Monday: Seen down on dollar, technical weakness

 

 

Strength in the U.S. dollar and technical weakness are expected to weigh on U.S. wheat futures at the start of Monday's day session.

 

Chicago Board of Trade July wheat is called to open 10 cents to 15 cents per bushel lower. In overnight electronic trading, CBOT July wheat dropped 12 1/4 cents to US$5.72 1/2.

 

It looks as though action in wheat is "still macro-driven," with the markets taking direction from outside influences like the dollar, a CBOT floor trader said. Weakness in crude oil and in CBOT corn and soybeans add pressure to wheat, traders said.

 

The technical picture for wheat looks weak following recent setbacks, an analyst said. CBOT July wheat approached a one-month low Friday as it slipped for the third consecutive session.

 

"The tail end of last week saw important support levels broken, and when important support levels fail to hold, the bullishness kind of disappears rather fast!" FuturesTechs said in a market comment. "The bears had the better of things on Friday and saw us down to a low of US$5.77. We've breached this level in overnight trade."

 

The next downside price objective for the bears is pushing and closing CBOT July wheat below solid technical support at US$5.50, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$6.25, he said.

 

First resistance is seen at Friday's high of US$5.98 and then at US$6.07 1/2, the analyst said. First support lies at Friday's low of US$5.77 and then at US$5.70, he said.

 

There is a lack of supportive fundamental news to boost the markets, traders said. Global supplies are considered comfortable, and demand for U.S. wheat is considered lackluster.

 

Dry weather continues to hamper wheat planting in Argentina, with rainfall desperately needed across much of the Pampas for farmers to proceed with seeding, the Agriculture Secretariat said in its weekly crop report Friday. The markets are assuming that Argentina, which was traditionally a major exporter on the world market, will export little to no wheat in 2009-10, a CBOT trader said.

 

In the U.S., thunderstorms and severe weather in the central and southern Plains are unfavorable for maturing hard red winter wheat and the early harvest, private weather firm DTN Meteorlogix said. Conditions may improve during the six-to-10-day period as the ridge moves back into the area, it said.

 

Moving north, warmer temperatures will favor U.S. spring wheat after recent cool to cold conditions. Scattered thundershowers also mostly favor the developing crop, Meteorlogix said. Crops on the Canadian prairies should benefit from a warmer trend into the first part of the week, although western crop areas are still too dry, according to the firm.

 

In other news, Egyptian authorities are double-checking documents relating to recent imports of Russian wheat into Egypt as a result of a criminal investigation into whether paperwork for one shipment was forged, according to a person at the General Prosecution Office. Egypt is a major buyer of wheat on the world market.