December 23, 2009

 

US Wheat Outlook on Wednesday: Steady-up slightly; demand limits upside

 

 

U.S. wheat futures are expected to open steady to slightly higher Wednesday amid a lack of fresh news and directionless overnight trade.

 

In overnight trade, March wheat was up 1/4 cent to US$5.23 1/4 per bushel and July wheat was down 1/4 cent to US$5.47 1/2.

 

Ample supplies and weak demand is keeping a lid on the market, traders said. Gains on Tuesday were attributed to intermarket spreading, not fundamentals.

 

"There's plenty of wheat in the world," a trader said.

 

The market will take its cues from outside markets, but those markets, including the dollar, are not providing much direction Wednesday morning, traders said.

 

While poor demand limits the upside, expectations of increased fund investment in the new year is providing some underlying support, analysts said. Index fund rebalancing, expected at the start of the year, has already begun and is supportive to wheat, some traders said.

 

Light-volume trade is expected through the rest of the week due to the Christmas holiday. The market will be closed Friday and close early on Thursday at 1 p.m. EST.

 

Traders note that concerns about reduced acreage, highlighted by projections from Informa Economics last week, could give the market underlying support, but that it is early to put too much emphasis on 2010 acres.

 

The next downside price objective for the bears is pushing and closing March prices below solid technical support at the November low of US$5.07 1/2, a technical analyst said.

 

The next upside price objective is to push and close March futures prices above solid technical resistance at last week's high of US$5.48 a bushel.

 

First resistance is seen at this week's high of US$5.30 and then at US$5.37 1/2. First support lies at last week's low of US$5.14 1/4 and then at US$5.07 1/2.