The wheat market may be poised for a correction, analyst says
The wheat markets are in need of technical correction, but more hot and dry weather is on its way.
The wheat market turned lower from an overbought condition after reaching key resistance, and it may be set for a short-term correction.
September Chicago wheat closed higher on the session Tuesday, but down 17½¢ from an early peak and back below key technical resistance at $7.07. Talk of the overbought condition helped trigger some selling, as the early rally pushed the market to its highest level since May 14.
September Kansas City Wheat has closed higher for nine of the last 10 trading sessions, and it also closed well off the early highs yesterday, below key resistance at $6.61, a 50% retracement of the May-July break.
December Minneapolis Wheat closed lower on the session with an inside trading day.
European milling wheat futures pushed to a two-month high and closed 0.8% higher on the day.
Fears of further damage to the spring wheat crop and ideas that the Canadian wheat production could drop more significantly than expected has added to the positive tone.
Spring wheat crop conditions came in well below trade expectations this week, and the forecast shows a few more weeks of hot and dry weather. Hot and dry conditions in western Canada are causing uncertainty in estimating crop yields.
The spring wheat crop is in much worse shape than expected and the forecast is still supportive, but the market is overbought and due for some correction. Close-in resistance for September Chicago Wheat is at $7.07 and $7.18, with $6.88½ and $6.69¾ as support. September KC Wheat resistance is at $6.81½, with support at $6.42 and $6.37½.
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