December 29, 2008

 

CBOT Corn Outlook on Monday: Up 7-9 cents, weaker dollar drives overnight

 

 

The Chicago Board of Trade corn futures rally is expected to continue Monday, following the overnight trend where grain, oilseeds and crude oil were lifted by marked weakness in the U.S. dollar index.

 

Corn is called 7-9 cents higher, after breaking the US$4 psychological resistance level and closing Friday at levels not seen since early November. In overnight electronic trading, CBOT March corn gained 8 1/2 cents to US$4.20 3/4 a bushel; May corn rose 8 1/2 cents to US$4.31 and July corn added 9 1/4 cents to US$4.41 3/4.

 

"Prices surged in thin holiday trade last week as focus shifted toward year-end positioning amid talk of a strengthening La Nina in the equatorial Pacific," analyst Arlan Suderman said in his Farm Futures market outlook. "Chart buy signals were triggered that accelerated gains, but those gains must now be tested in a bit stronger trade volume."

 

"Much of last week's gains came on declining open interest, which indicates that price strength had more to do with short-covering than it did outright buying," he said. "Overall trade will likely remain slow in this holiday shortened week, but a few more traders will make their way back to the trading floor."

 

If March corn doesn't quickly take out resistance near US$4.25, it will be vulnerable to profit-taking, he added.

 

Traders eye improving chart signals as positive signs, but are cautious of the thin, holiday trade. Forecasts aren't uncommon of at least one day of profit-taking in the midst of the current rally.

 

"Stochastics and the relative strength index are overbought but remain bullish, signaling sideways-to-higher prices are possible in the near term," a market technician said.

 

After first resistance at Friday's high crossing of 4.14 1/2, he marked the next upside targets at 4.33 1/2 - the 25% retracement level of the July-December decline crossing, then November's high crossing at 4.38 1/2.

 

"Closes below the 20-day moving average crossing at 3.64 3/4 would temper the near-term friendly outlook in the market," he added, pegging first support at the 10-day moving average crossing of 3.88 3/4 and second support at the 20-day moving average crossing of 3.64 3/4.

 

"More rain is needed for developing corn through south-central Brazil," according to DTN Meteorlogix. "Some beneficial rains are possible during the next few days favoring northern or northeastern areas."

 

"Harvest is nearly complete across northeastern Brazil," Meteorlogix said, noting dryness has caused some quality issues.