July 18, 2007

 

US Wheat Outlook on Wednesday: 2-4 cents higher, taking cue from overnight

 

 

U.S. wheat futures are expected to start Wednesday's day session firmer on follow-through buying from the overnight and with underlying support from expectations for solid demand, traders said.

 

Wheat futures are called to open 2-4 cents higher per bushel. In overnight e-cbot activity, Chicago Board of Trade September wheat ended up 4 cents at US$6.05 1/4, and CBOT December wheat closed 2 3/4 cents higher at US$6.20.

 

The overnight gains should give wheat direction in early trading, and the markets may also look to movements in CBOT corn and soybeans for leadership, an analyst said. Heavy losses in corn and soybeans pulled wheat lower Tuesday, despite a sizable sale of 300,000 tonnes of U.S. soft red wheat to Egypt.

 

It is a "significantly bearish clue" when bullish fundamental news fails to push a market higher, a technical analyst said. A rare and potentially bearish diamond pattern has formed on the daily bar chart for CBOT December wheat and is an early clue of a market top being in place, he said.

 

The demand outlook for U.S. wheat, however, remains "brisk" as more Egyptian tenders are expected on prices breaks, a CBOT floor broker said. Floor chatter indicates Syria has confirmed it will cancel about 400,000 tonnes of wheat exports due to a poor crop. Any confirmation should not have too strong of an impact on the markets because talk about the cancellations began several weeks ago, the broker said.

 

The bulls' next upside price objective is to close CBOT December wheat above resistance at last week's high of US$6.40, the technical analyst said. The next downside price objective for the bears is closing prices below psychological support at US$6.00 a bushel. First resistance is seen at US$6.26 and then at US$6.30. First support lies at Tuesday's low of US$6.16 and then at US$6.10.

 

Kansas City Board of Trade December wheat closed near the session low Tuesday and scored a bearish "outside day" down on the daily bar chart, the technical analyst said. Wheat bulls still have the technical advantage, but a bearish head-and-shoulders top reversal pattern has formed on the daily bar chart, he said.

 

The bulls' next upside price objective is closing prices above solid resistance at US$6.21 1/2, which would fill on the upside this week's downside price gap on the daily bar chart. The bears' next downside objective is closing prices below solid support at US$6.00 a bushel. First resistance is seen at US$6.10 and then at US$6.15. First support is seen at US$6.00 and then at US$5.95.

 

Looking at the weather, there is still a mostly dry and mostly very hot weather pattern for spring wheat areas of the U.S. north Plains, DTN Meteorlogix said. Soil moisture will diminish and stress to wheat will increase, the weather firm said.

 

Australian wheat production this year is set to double from last year to around 22 million metric tonnes in a rebound from a severe drought, analysts and industry participants said. The production increase, however, will likely fall short of the record 26.1 million tonnes produced in 2003 as dry conditions in Western Australia's northern wheat belt are unfavorable, they said.