March 24, 2010

 

CBOT Soy Outlook on Wednesday: US dollar strength to weigh on prices

 

 

A rally in the U.S. dollar has Chicago Board of Trade soybean futures poised for lower price action in the absence of fresh fundamental news.

 

CBOT soybeans are seen opening 6 cent to 8 cents higher.

 

Overnight, CBOT May soybeans were 7 1/2 cents lower at US$9.60 1/2 a bushel.

 

The U.S. dollar index's climb to new 2010 highs is producing broad-based weakness across the commodity sector, analysts said. In the absence of fresh supportive fundamental news, the dollar's influence and technical pressure from Tuesday's stumble is expected to put soybean prices on the defensive.

 

A firm dollar is often seen as bearish, attracting speculative selling because of perceptions that it makes U.S. grain and oilseeds less attractive to foreign buyers and reduces investors' appetite for risk.

 

Futures are expected to garner additional pressure from trade ideas that recent gains in U.S. soybean futures have made prices high in the face of an advancing South American harvest.

 

However, lingering uncertainty about potential 2010 U.S. soybean plantings is seen limiting downside potential, with traders expected to continue to even some positions ahead of the March 31 planting intentions report.

 

Nevertheless, tight old crop ending stock estimates will support nearby contracts, as traders remain cautious that a hiccup in 2010 production could extend supply tightness into the 2010-11 marketing year.

 

A technical analyst said first resistance for May soybeans is seen at Tuesday's high of US$9.76 1/2 and then at US$9.85. First support is seen at Tuesday's low of US$9.64 3/4 and then at US$9.50.

 

In overseas markets, soybean futures settled lower on the Dalian Commodity Exchange Wednesday as funds continued to exit the market amid a lack of fresh fundamental cues and uncertainty ahead of key U.S. data due for release later this month. The September 2010 soybean contract settled down RMB20, or 0.5%, at RMB3,860 a metric tonne.

 

Crude palm oil futures on Malaysia's derivatives exchange ended lower Wednesday on concerns over disappointing exports amid rising production, said trade participants. The June contract on the Bursa Malaysia Derivatives exchange ended MYR31 lower at MYR2,560 a metric tonne.