August 15, 2008

 

US Wheat Outlook on Friday: Seen retreating 17-20 cents amid dollar rally

 

 

U.S. wheat futures are poised to start Friday's day session lower in a retreat from advances earlier this week amid pressure from weakness in other markets and a rally in the U.S. dollar.

 

Chicago Board of Trade September wheat is called to open 17 to 20 cents per bushel lower. In overnight electronic trading, CBOT September wheat fell 21 1/4 cents to US$8.43 1/4, while CBOT December wheat dropped 21 1/2 cents to US$8.68.

 

CBOT September wheat has gained 99 1/4 cents since last Friday and has room to pull back, an analyst said. Losses in CBOT corn and soybeans overnight and in crude oil should help pull wheat into negative territory, traders said.

 

A rally in the greenback also is bearish for the grains, as it gives foreign importers less buying power. Wheat will struggle to trade both sides amid the pressure from outside markets, a CBOT floor trader said.

 

Still, a 20-cent drop for wheat would not significantly change the technical outlook for wheat, the floor trader said. Technical charts look solid after the recent rally, he said.

 

"The bears have had the better of the overnight session, but that's probably just a dollar story," FuturesTechs said in a market comment. "If US$8.45 holds on pullbacks, there's scope for upside, targeting US$9.65" for CBOT December wheat.

 

Indeed, bulls have the near-term technical advantage in wheat, a technical analyst said. A "big double-bottom reversal pattern" has formed on the daily bar chart for CBOT December wheat, he said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$8.50, the analyst said. Bulls' next upside price objective is to push and close December futures prices above solid technical resistance at Thursday's high of US$9.12 3/4, he said.

 

First resistance is seen at US$9.00 and then at US$9.12 3/4. First support lies at US$8.75 and then at US$8.60.

 

Solid export demand continues to provide support for the wheat markets, traders said. Private exporters reported export sales of 689,310 metric tonnes of hard red winter wheat for delivery to Iran, which has shown up as a buyer of U.S. HRW wheat in the past three weekly USDA export sales reports.

 

Egypt's state-owned General Authority for Supply Commodities, or GASC, said it bought 155,000 metric tonnes of Russian and Ukraine wheat on a cost and freight basis. The wheat is for shipment Sept. 16-30.

 

The U.S. last week won the bulk to business from a GASC tender. The recent price run-up may have discouraged Egypt from buying more this week, a trader said.

 

Weather in spring wheat areas of the U.S. northern Plains looks to be hotter and drier for at least the next five to six days, DTN Meteorlogix said. The conditions the maturing crop and aides in dry down for the spring wheat harvest, the private weather firm said.

 

In Argentina, the outlook for the next seven days offers only a little light shower activity, Meteorlogix said. Long-range charts for Australia contain somewhat drier conditions in the southeast region later next week, the firm said.