September 19, 2008

 

US Wheat Outlook on Friday: Seen up on outside markets; thin trade

 

 

U.S. wheat futures are poised to start Friday's day session firmer on spillover strength from gains in outside markets and in a rebound from Thursday's sharp losses.

 

Benchmark Chicago Board of Trade December wheat is called to open 7 to 10 cents a bushel higher. In overnight electronic trading, CBOT December wheat climbed 10 3/4 cents to US$7.03 1/2.

 

Strength in crude oil should help lift the grains in early activity, traders said. Funds often trade in a basket of commodities, so gains in one market can help lift others.

 

A recovery in U.S. financial markets should provide additional support, as jitters about the health of the financial sector dragged wheat sharply lower Thursday, an analyst said. News that the government is working on a massive plan to take bad assets off the balance sheets of financial companies is supportive to financial markets, he said.

 

Wheat is due for a "pop" after falling hard Thursday, a CBOT floor trader said. Volume is expected to be thin ahead of the weekend and after a volatile week of trading, he said.

 

There wasn't much fresh fundamental news out for wheat overnight. Concerns about lingering dryness in the southern hemisphere remain somewhat supportive, although outside influences are trumping fundamental factors, a CBOT trader said.

 

Argentina has "only minor chances for showers every seven or eight days or so," DTN Meteorlogix said. The weather pattern in Australia, meanwhile, offers a couple of chances for showers in central and northeast New South Wales early next week, the private weather firm said.

 

In the U.S., recent rainfall has helped recharge soil moisture for early growth of wheat in the central and southern Plains, Meteorlogix said. Warmer, drier weather this week should be more favorable for fall field work, the firm said.

 

Looking at technical charts, prices remain in a four-week-old downtrend, a market technician said. The markets have tanked since a move higher on Aug. 21.

 

"The wheat bears still have the technical advantage and regained some power Thursday," the technician said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at this week's low of US$6.86 1/4, the technician said. Bulls' next upside price objective is to push and close December futures prices above solid technical resistance at US$7.50, he said.

 

First resistance is seen at US$7.00 and then at US$7.14. First support lies at US$6.86 1/4 and then at US$6.75.