December European milling wheat closed higher for a second day on Sept. 23, ending EUR 2.50 metric ton (mt) higher at EUR 252/mt. This move saw a push above the 61.8% retracement of the move from the recent August high of EUR 257.75/mt to the September low of EUR 236/mt, while also breaching the EUR 250 level. This move was despite euro strength against the U.S. dollar this session.
Resistance broken this session has been tested since Aug. 18 or for more than one month. This move is also despite the stochastic momentum indicators (first study) moving into over-bought territory, which would normally act to temper noncommercial buying interest. Watch for a test of the contract high reached in August at EUR 257.75/mt, only EUR 5.75/mt higher than Thursday's close and the highest trade since 2012 on the continuous active chart.
The blue line on the lower study shows the Dec/March inverse strengthening to EUR 6/mt, a growing bullish signal of front-end demand. Over the past five years, this spread has traded at a EUR 3.30 carry on this date (March trading over the December). At this time last year, this spread was shown at a modest EUR .50 inverse, the only year in the past five to show an inverse on this date.
In 2020-21, the European Union was the second-largest global wheat exporter, while the most recent September WASDE has the EU and Russia forecast to export 35 million metric tons (mmt) each. Weekly EU statistics shows exports over the first 12 weeks of the crop year or as of Sept. 19 at 6.530 mmt, up 1.95 mmt or 42.6% from the same period in 2020-21.
While Europe is blessed with volume, quality may be a factor as we move later into the marketing year and this bears watching.
Cliff Jamieson can be reached at firstname.lastname@example.org
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