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Traders await USDA data

02/10/2014 @ 8:04am

March CBOT corn futures edged to a higher close Friday, but punched to a sharply higher settlement on the weekly chart last week. The weekly chart reveals a strong upside breakout to the highest price levels since mid November. Rising export demand has been supporting the corn market in recent days.

Monday's big event will be the U.S. Department of Agriculture's February world supply-and-demand report, which is scheduled for release at noon EST. There are expectations the USDA will reduce its corn stockpile estimate following the recent strong export demand. The USDA is forecast to lower its stockpiles estimate for corn to 1.606 billion from a January projection of 1.631 billion, according to analysts surveyed by The Wall Street Journal.

Technically, on the daily chart, March corn has been basing out since mid November, after a long and protracted bear market. Last week's rally pierced the top of that multi-month base range at the $4.40 3/4 zone, or the Dec. 10 high. That level remains support for the market and the level that the bulls need to hold to keep the near term uptrend intact.

Daily momentum has hit overbought levels, with the nine-day relative strength index at 72% on Friday. But, strongly trending markets can remain at overbought levels for days or even weeks. If a bullish surprise emerges from the USDA report, the corn market could see a sharp move to the upside. The $4.49 1/2 level is minor resistance, with the $4.60 area acting as another upside target for the bulls.

On the downside, if a close were seen back under support at $4.40 3/4, that would reveal that corn was vulnerable to a corrective pullback following the recent rally move.

$6.70     -- the contract high 
   $4.36 1/2 -- the 10-day moving average 
   $4.32 1/2 -- the 20-day moving average 
   $4.29 1/2 -- the 40-day moving average 
   $4.06 1/4 -- the contract low 
 
MARCH CBOT WHEAT, combined pit and electronic trading

March CBOT wheat erased early gains to close slightly higher Friday. Nonetheless, the contract did post solid gains on the weekly chart Friday. The market is bracing for Monday's USDA report, in which analysts expect to see a reduced wheat stockpile estimate. U.S. wheat inventories at the end of the marketing year on May 31 are expected by analysts to be projected at 602 million bushels, down from the 608 million forecast last month and 718 million that were on hand last year, according to analysts surveyed by The Wall Street Journal.

However, rising global wheat inventories remains a bearish weight on the market.

Technically, the market is in the midst of a counter-trend, corrective phase. The primary trend remains bearish, but a minor low and bottom has formed at $5.50, the Jan. 29 daily low.

For now, the $5.93 1/4-$5.92 3/4 zone has capped the upside corrective probing and that area remains important resistance. It would take sustained gains above that area to suggest a more significant bottom was forming and to open the door to additional corrective rally strength. An upside target beyond that level lies at $6.12 3/4.

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