This article is originally referred from IFC Markets Technical Analysis
The agricultural group InVivo expects French wheat exports (outside the EU) to drop to 4,8mln tonnes in 2016/17 agricultural season from 12,5mln tonnes a season earlier. France is the European Union’s top grain exporter. The reduction of crop was caused by floods in Europe this spring. Will the wheat prices advance?
According to forecasts, this year wheat crop in France will be 28-30mln tonnes, which is far less than last year’s level: 40,5mln tonnes. In the EU its production will reduce to 137,6mln tonnes from 151,4mln tonnes in 2015. Besides France, the flooding has affected Germany, Poland and the the Benelux countries. USDA will release on Friday, August 12, its monthly “Grains Supply and Demand Report”, which can affect futures prices. USDA is expected to revise down wheat stocks outlook at the end of 2016/17 to 251,63mln tonnes from 253,7mln tonnes as mentioned in its July overview. At the same time, soybean stocks have remained nearly unchanged, while those of corn might rise.
On the daily chart Wheat: D1 is moving to the upper boundary of sideways channel. The MACD indicator has formed the signal to buy. The Parabolic indicator indicates sale and its signal may serve as an additional level of resistance that must be overcome. The Bollinger bands have narrowed which means lower volatility.
The RSI indicator is in the rising trend and below 50. It has formed already two positive divergences. The bullish momentum may develop in case the wheat prices surpass the 2nd fractal high at 444. This level may serve the point of entry. The initial stop-loss may be placed below the last fractal low, which is at the same time the 9-year low: 414. After opening the pending order we shall move the stop to the next fractal low following the Bollinger and Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point.
The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 414 without reaching the order at 444, we recommend cancelling the position: the market sustains internal changes which were not taken into account.
|Buy stop||above 444|
|Stop loss||below 414|
Original Source: IFC Markets Technical Analysis