Wheat Market Dips Amidst Dollar Strength and Supply Concerns

The wheat market experienced a downturn due to fund and technical selling, compounded by a stronger dollar during the trading session. Despite periodic support linked to escalations in the Russia/Ukraine conflict, such boosts are short-lived. Attention also focuses on pre-planting conditions in Australia, the northern U.S. Plains, and Canada.

For the U.S., wheat forecasts show stable supplies and domestic use, reduced exports, and increased ending stocks for the 2023/24 period. Global projections anticipate larger supplies, consumption, and trade, with reduced stocks. However, concerns over corn production persist, with analysts expecting downward revisions due to poorer plant quality and continued robust demand. Spring wheat yields and acreage in northern U.S. Plains states are also expected to be trimmed due to planting delays. Upward revisions in global wheat supply estimates are anticipated, primarily due to Russia's return to export markets.

In the U.S., the number of wheat farms has significantly declined over the years, impacting production. Wheat has become a rotational crop, often overshadowed by more profitable alternatives like corn and soybeans. While wheat production costs have increased marginally, profitability remains lower compared to corn and soybeans.

Despite initial gains, wheat futures declined due to ample supplies from Black Sea regions and a stronger dollar, which diminishes the competitiveness of U.S. grain exports. Concerns over disruptions to Black Sea trade eased, contributing to the fall in European wheat futures. However, heightened tensions in the Black Sea region and talk of potential EU tariffs on Russian imports have slightly boosted global and domestic grain markets.

The market awaited the results of an Egyptian wheat tender, while Japan sought food-quality wheat from various sources. Ukraine reported grain shipments, with wheat exports maintaining strength despite an overall decrease in grain exports.

Increased production globally, as projected by the International Grains Council, exerts downward pressure on prices. However, concerns over tighter supplies in the UK and the EU counterbalance these factors.

Analysis based on technical indicators indicates the likelihood of wheat futures testing resistance levels around $5.55 per bushel. There are indications of potential patterns, including a flat pattern near the $5.55 mark and the formation of a double-bottom pattern at approximately $5.89. Support is observed at $5.47, and a breach below this level may lead to a decline within the range of $5.38 to $5.42.

Data for Technical Analysis (5H) CFD US Wheat Futures - May 24 (ZWK4)

Resistance : 550.84, 551.90, 553.62

Support : 547.40, 546.34, 544.62                 

5H Outlook

Source: Investing.com   

Buy/Long 1 If the support at the price range 544.90 - 547.40 is touched, but the support at 547.40 cannot be broken, the TP may be set around 552.12 and the SL around 543.65, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 550.84 - 553.34, TP may be set around 556.62 and SL around 546.15, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 550.84 - 553.34 is touched, but the resistance 550.84 cannot be broken, the TP may be set around 547.40 and the SL around 554.59, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 544.90 - 547.40, TP may be set around 543.12 and SL around 552.09, or up to the risk appetite.       

Pivot Points Mar 21, 2024 03:02AM GMT