October 26, 2007

 

US Wheat Outlook on Friday: Up 4-7 cents on rebound, positioning, dollar

 

 

U.S. wheat futures are poised to start Friday's day session firmer in a turnaround from recent weakness and amid pre-weekend position-squaring, traders said.

 

Benchmark Chicago Board of Trade December wheat is called to open 4 to 7 cents per bushel higher. In e-cbot overnight trading, CBOT December wheat rose 4 cents to US$8.06.

 

Wheat futures are due for a bounce after falling sharply on bearish technical momentum and a lack of fresh bullish news, a CBOT trader said. Pre-weekend positioning is expected after volatile price swings earlier this week, he added.

 

The markets should also feel a boost from weakness in the U.S. dollar as a feeble greenback gives foreign importers more buying power, an analyst said. A rally in crude oil, along with general strength in outside markets, further supports the firmer tone, he said.

 

However, wheat could still feel some pressure from bearish technical momentum, a technical analyst said. CBOT December wheat is in a steep four-week-old downtrend on the daily bar chart, he said.

 

The pullback in CBOT December wheat this week has provided "the strongest technical signals yet that a major market top is in place" after the markets rallied to all-time highs this summer, the technical analyst said. Prices hit record levels earlier this fall as fear about shrinking world stocks accelerated demand for U.S. wheat.

 

The bulls' next upside price objective is to push and close CBOT December wheat above solid resistance at US$8.41, which would fill on the upside this week's downside price gap on the daily bar chart, the technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid technical support at US$7.60.

 

First resistance is seen at Thursday's high of US$8.14 and then at US$8.25. First support lies at Thursday's low of US$7.96 and then at US$7.85.

 

Bears have also gained some fresh downside technical momentum at the Kansas City Board of Trade, the technical analyst said. The bulls' next upside price objective is pushing and closing KCBT December wheat above solid resistance at US$8.58, which would fill on the upside this week's downside price gap on the daily bar chart. The bears' next downside objective is pushing prices below major psychological support at US$8.00.

 

First resistance is seen at Thursday's high of US$8.37 and then at US$8.50. First support is seen at Thursday's low of US$8.15 and then at US$8.06.

 

There is little fresh news out for the markets to chew on, traders said.

 

Ukraine's agriculture ministry said it was preparing to resume grain export in early November after a virtual suspension in July-October, but that news has already been digested by the market, a CBOT floor trader said. There are also questions about whether Ukraine has much wheat left to sell, an analyst said.

 

Ukraine harvested 29.5 million metric tonnes of grain to Oct. 25 in bunker weight and the total harvest this year is expected to exceed 29 million tonnes in clean weight, down from 34.3 million tonnes last year, the agriculture ministry announced Friday. The drop in harvest is attributed to adverse weather conditions.

 

China, meanwhile, will sell 200,000 metric tonnes of imported wheat from state reserves in an auction on Nov. 1, according to the China National Grain & Oil Trade Center. China holds auctions of imported wheat once or twice a month to meet domestic demand.

 

Australia said production from the wheat crop now being harvested in the New South Wales state will fall 19% to 1.7 million metric tonnes from the drought-affected crop of 2.1 million tonnes in 2006. The crop forecast should not impact market activity much as the trade has already priced in significant crop losses in Australia due to drought, an analyst said.