December 7, 2009

 

US Wheat Outlook on Monday: Seen 3-5 cents lower; technical chart weakens

 

 

U.S. wheat futures are expected to start lower Monday on weakening technical charts and unsupportive fundamentals, with a lack of strong leadership seen from outside markets.

 

Chicago Board of Trade March wheat is called to open 3 to 5 cents per bushel lower. In overnight electronic trading, CBOT March wheat fell 4 1/2 cents to US$5.53 1/2.

 

Technical charts are "tipping over" after a slide last week that ended with CBOT March wheat settling Friday at a bearish weekly low close, a trader said. Last week's losses may look "short-term overdone," but the fundamental outlook remains weak, he said.

 

U.S. wheat export sales have lagged this marketing year, which began in June, amid stiff competition for business from other countries. There is a lot of wheat to go around in the world, and foreign countries have not been in a rush to buy.

 

Technical analysis firm FuturesTechs said it felt it could "start siding with the bears" after CBOT March wheat last week fell "through bold supports" at US$5.64 1/2. The market has recently found support from fund buying and money flowing into commodities.

 

CBOT March wheat hit a session low of US$5.50 1/4 in overnight electronic trading. Below that level, there is weak support until US$5.16 1/2 and US$5.07 1/2, FuturesTechs said.

 

Another technical analyst said the next downside price objective for bears is pushing and closing CBOT March wheat below solid technical support at US$5.52. The bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.85, he said.

 

First resistance is seen at US$5.70 and then at US$5.75, the technical analyst said. First support lies at Friday's low of US$5.55 1/2 and then at US$5.52.

 

In outside markets, gold and crude oil prices are slipping, while the dollar is rising. That set-up is often seen as bearish for the grains, as a firm dollar makes U.S. wheat less competitive for export business. However, activity in outside markets looks relatively subdued for now, a CBOT floor traders said.

 

"Outsides aren't giving you much," he said.

 

Speculative funds are short about 18,000 contracts in CBOT wheat, a trader said. The Commodity Futures Trading Commission said in a supplemental Commitments of Traders report, issued late Friday, that they were short 15,167 contracts as of Dec. 1.

 

The U.S. Department of Agriculture at 4 p.m. EST is slated to issue its final crop progress report of the year, including updates on winter wheat development and condition ratings. Snow in the central and southern U.S. Plains will provide a protective cover for hard red winter wheat in the north and central areas Tuesday before "very cold" temperatures hit later this week, according to private weather firm DTN Meteorlogix.