October 25, 2006

 

CBOT Soy Outlook on Wednesday: Seen higher on follow through tech buying

 

 

Chicago Board of Trade soybean futures are seen starting Wednesday's day session higher, fueled by follow through buying from Tuesday amid bullish technical momentum.

 

Soybean futures are called to open 4 to 6 cents higher.

 

In e-CBOT trade, November soybeans were 6 1/4 cents higher at US$6.29 3/4 and January was 6 cents higher at US$6.43 per bushel.

 

Overnight indicators are pointing to a higher start, as the market remains immune to its bearish fundamentals, with expected price strength in neighboring grain futures helping promote upside movement, analysts said.

 

A quiet news front will once again keep technical considerations in play, with upside movement seen as the path of least resistance amid the unwillingness of sellers to offset the buying push of the speculative sector, traders added.

 

Meanwhile, overbought market conditions and fears the market is pricing itself out of consumption have traders continuing to look for corrective action to emerge.

 

The Relative Strength Index for January soybeans on Tuesday's close stood at 81.07. A RSI reading of 70.0 and above are considered overbought.

 

A market technician said soybeans have solid upside technical momentum, but futures are overdone on the upside and due for a decent corrective pullback soon. The next upside price objective is to close prices above solid chart resistance at the contract high of US$6.50. The next downside price objective is closing prices below solid support at US$6.00.

 

First resistance for January soybeans is seen at Tuesday's high of US$6.38 3/4 and then at US$6.40. First support is seen at US$6.30 and then at Tuesday's low of US$6.27.

 

The DTN Meteorlogix weather forecast says rainfall and cold temperatures will further delay the crop harvests over the southern and eastern portion of the Midwest during the next few days.

 

In the eastern Midwest, there is a chance for showers late Wednesday through the southwest portion of this region. Rain is on tap through southern and eastern areas during Thursday into Friday. The heaviest rain will likely occur along or south of a line extending from near Quincy, Illinois to near Detroit, Michigan. Mostly light showers are on tap northwest of this region. Temperatures will average below or much below normal during this period.

 

In demand news, the Kaohsiung branch of Taiwan's Breakfast Soybean Procurement Association, or BSPA, bought 46,000 metric tonnes of U.S. soybeans for November-December delivery Wednesday, an association official said.

 

U.S. Midwest cash soybean basis bids are mostly unchanged Wednesday. Spot cash soybean bids were up 10 cents in Keokuk, Iowa, down 1 1/2-cens in Peoria, Ill., and down 3 cents in St. Louis, Mo., according to cash sources Wednesday.

 

Rotterdam soybeans and soymeal were mostly higher. European vegoils were mostly lower.

 

In overseas markets, soybean futures traded on China's Dalian Commodity Exchange settled mostly lower Wednesday on a downward correction, analysts said. The benchmark January 2007 contract fell RMB1 to settle at RMB2,580 a metric tonne, after trading between RMB2,569/tonne and RMB2,590/tonne.