December 27, 2007

 

US Wheat Outlook on Thursday: e-CBOT weakness seen adding pressure

 

 

U.S. wheat futures are expected to start Thursday's day session mixed, with front-month contracts coming under pressure from overnight weakness and a lack of fresh bullish news, traders said.

 

Benchmark 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 5 1/4 cents to US$9.36.

 

Nearby wheat futures had room to pull back overnight following recent gains, traders said. Some follow-through selling is expected, they said.

 

However, overnight volume was light and wheat futures could bounce higher in the day session, particularly if soybeans extend their run toward all-time highs, a CBOT floor trader said. It's likely wheat will look to neighboring markets for directions as there is little fresh news out to chew on, he said.

 

Technically, the wheat markets remain under the influence of a Dec. 17 bearish reversal day, a technical analyst said. In order for the bulls to regain the upper hand near term, CBOT March wheat must push above the Dec. 19 high of US$9.79, he said. On the downside, major technical support is seen at US$9.14 1/2, 38.2% of the November-December rally, and US$9.09, the Dec. 11 low, he said.

 

First resistance is seen at US$9.52 1/2 and then at US$9.79. Short term support lies at US$9.35 and then at US$9.28.

 

At the Kansas City Board of Trade, March wheat has traded below its 10-day moving average for three sessions in a row, the technical analyst said. The contract needs to climb back above that level to improve the very short-term technical picture, he said.

 

Additional resistance above the 10-day moving average comes in at US$9.95 to 10.00 zone, the analyst said. On the downside, initial support comes in at US$9.62 a bushel, with second support at US$9.55 1/2. If the market sustains declines below US$9.55 1/2 near term, it would open the door for additional corrective losses in the days ahead, he said.

 

Expectations for rain in hard red winter wheat areas of the U.S. southern Plains are bearish for the new crop, but the markets have not been paying much attention to the forecasts, a trader said. DTN Meteorlogix said precipitation in the region during the next few days is "mostly favorable."

 

In the eastern Midwest and Delta, moderate precipitation during the Next five days will maintain high available soil moisture through wheat Areas, Meteorlogix said. Colder temperatures next week do not look cold enough to harm wheat, and longer range charts show a drier and warmer period, the private weather firm said.