September 3, 2008


US Wheat Outlook on Wednesday: 3-5 cents down on technical selling, spillover



U.S. wheat futures are poised to start Wednesday's day session lower on technical selling and spillover pressure, although the markets could stabilize after Tuesday's sell-off, analysts said.


Chicago Board of Trade December wheat is called to open 3 to 5 cents per bushel lower. In overnight electronic trading, CBOT December wheat slipped 3 3/4 cents to US$7.63.


Bears have "solid downside technical momentum" after CBOT December wheat Tuesday produced a rare gap-lower opening on the electronic daily bar chart and hit a fresh nine-month low, a technical analyst said. Serious near-term chart damage has been inflicted recently, he said.


However, the markets "are starting to look oversold after their steep drop over the last two weeks," said Bryce Knorr, senior editor for Farm Futures. CBOT December wheat Tuesday ended US$1.55 1/2 off its closing price Aug. 21, when the markets spiked.


Spillover selling could add pressure to wheat, as CBOT corn and soybeans are called to open lower on weakness in crude oil, strength in the U.S. dollar and forecasts for moisture in dry areas of the Midwest. A firmer greenback and a slide in crude oil pressured commodities Tuesday.


"Wheat could follow the other markets lower today, but may again be the first to try to turn around," Knorr said.


Liffe's Paris November milling wheat Wednesday was up EUR1, or 0.6%, at EUR179.25/tonne after sliding to a 13-month-low Tuesday.


Traders said they are waiting to see the results of an Egyptian tender. Egypt's state-owned General Authority for Supply Commodities said it was tendering to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment Oct. 1-15 on a free-on-board basis.


There was little other fresh fundamental news out for the markets to digest, traders said. The U.S. Department of Agriculture said the U.S. spring wheat harvest was 81% complete as of Sunday, compared to the average of 83% average.


Wet conditions and very cool temperatures in the U.S. northern Plains will likely mean harvest delays for spring wheat during this week, according to DTN Meteorlogix. Scattered shower activity in the central and southern Plains will help replenish soil moisture for planting winter wheat during the coming weeks, the private weather firm said.


Favorable rains appear to be headed for Australia, with a system moving into southern Queensland and northern New South Wales on Wednesday, Meteorlogix said. Drought has slashed Australia's production for the past two years.


The next downside price objective for the bears is pushing and closing CBOT December wheat below major psychological support at US$7.00, the technical analyst said. The bulls' next upside price objective is to push and close December futures prices above solid technical resistance at US$7.98 1/2, which would fill on the upside Tuesday's downside price gap, he said.


First resistance is seen at US$7.80 and then at US$7.98 1/2. First support lies at Tuesday's low of US$7.56 1/4 and then at US$7.50.

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