The wheat market is overbought, analyst says
The technical action has been very impressive (except for the weak close yesterday), but given the extremely overbought condition, we will not rule out the possibility that a short-term peak may have been put in place.
December Minneapolis wheat surged to a new contract high yesterday. It closed higher on the day but nearly 14¢ off the earlier highs. July Kansas City Wheat closed moderately higher but also nearly 14¢ off the highs. Concerns about freeze damage hitting the winter crops helped lift July Chicago Wheat to a new contract high before that market closed 18¢ off its highs. Wheat prices have rallied nearly 90¢ off its March 31 lows, leaving it extremely overbought. Stochastics are above 80. Recent showers in the Central Plains benefited soil moisture, but temperatures below freezing for the next few nights could cause some damage and burn-off.
Dryness and drought are causing concern in the Northern Plains ahead of spring wheat planting, and the showers this week will do little to increase soil moisture. The five-day forecast shows very little rain for the entire Plains except for southeastern Kansas and eastern Oklahoma. North Dakota is the driest at 78% short/very short, with South Dakota at 58%.
The six- to 10-day forecast calls for below-normal precipitation and above-normal temperatures for Nebraska, Kansas, Oklahoma, and Texas. The Dakotas are expected to see normal precipitation.
For the eight- to 14-day forecast, temperatures and precipitation are expected to be near normal. Dryness and drought are also a significant concern in the Canadian Prairies ahead of spring wheat planting.
Winter wheat in northern and Eastern Europe experienced cooler temperatures last week and again this week, which will slow growth.
A move under $6.51¼ for July wheat could attract increased selling pressure, with support seen at $6.46¼ and $6.42. The move to contract highs yesterday leaves 703½ as the next upside target.
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