November 28, 2007

 

US Wheat Outlook on Wednesday: Lower start following overnight weakness

 

 

Weaker overnight trade should keep U.S. wheat futures on the defensive at the start of Wednesday's day session, but short-covering and a shutdown of Argentina's export registry could offer support later, traders said.

 

Chicago Board of Trade March wheat is called to open 3 to 5 cents per bushel lower. In e-cbot overnight trading, CBOT March wheat fell 6 1/2 cents to US$8.45 1/4.

 

Wheat futures are feeling pressure from a bounce in the U.S. dollar, a CBOT floor trader said. A firmer dollar is seen as bearish for U.S. commodities because it gives foreign importers less buying power.

 

However, there could be some short-covering from funds during the session, traders said. The markets also are buzzing about the export situation in Argentina, and that could offer some support, an analyst said.

 

Argentina closed its wheat export registry for five days, according to the Agriculture Secretariat. The export registry opened Nov. 13, and exporters had already declared export sales of 6,473,775 metric tonnes of 2007-08 wheat as of Nov. 26, according to the Agriculture Secretariat. Analysts see about 10 million tonnes available for export in Argentina.

 

The closure of the registry is bullish because the markets are already nervous about tight world supplies, an analyst said. But a CBOT floor trader said the temporary shutdown was not a big deal because exporters can go back to making declarations on the sixth day.

 

Bulls have upside near-term momentum after solid gains Tuesday, a technical analyst said. A minor bullish pennant pattern has formed on the daily bar chart for CBOT and Kansas City Board of Trade March wheat, he said.

 

The bulls' next upside price objective is to push and close CBOT March wheat above solid technical resistance at this week's high of US$8.63, the analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at US$8.25.

 

First resistance is seen at Tuesday's high of US$8.53 and then at US$8.63. First support lies at US$8.40 and then at Tuesday's low of US$8.31.

 

At the KCBT, bulls' next upside price objective is pushing and closing March wheat above solid resistance at this week's high of US$8.80. The bears' next downside objective is closing prices below solid technical support at US$8.40.

 

First resistance is seen at Tuesday's high of US$8.66 and then at US$8.75. First support is seen at US$8.55 and then at Tuesday's low of US$8.49.

 

Hard red winter wheat, traded at the KCBT, may get a needed shot of water if the Plains see some precipitation this weekend, a floor trader said. DTN Meteorlogix said a disturbance coming out of the Rockies this weekend may produce some snow or rain in central and southern Plains, but the best chance is for the north and east areas. Very dry southwestern areas will miss most of the precipitation, the weather firm said.