Canada Markets

Positive Technical Signals seen for European Milling Wheat

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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European milling wheat posted its first weekly gain in six weeks in the week of March 11, while printing a bullish outside reversal bar on its weekly chart. This potential change in direction is supported by a bullish cross-over of momentum indicators as seen in the lower study, while the brown line on the first study points to a continued old-crop/new-crop inverse. (DTN ProphetX chart)

The old-crop lows may be in for the wheat market given positive signals in this week's trade. As seen on the attached weekly chart, Paris milling wheat moved EUR5.50/metric ton higher this week, its first higher weekly close in six weeks. This week's trade saw a higher daily close for four consecutive days (not shown), while Friday's close was the first to end above the contract's 20-day moving average since Feb. 4.

In addition to the higher close, this week's trade moved below last week's low to reach its lowest level traded in over eight months, a double-bottom of EUR181 reached in Monday and Tuesday trade, only to reverse direction to trade higher than the previous week's range, while closing near the upper-end of the week's range.

This outside weekly bar is a bullish reversal signal that could lead to further gains. The first upside target is set at EUR194.03, the 33% retracement of the move from the contract's July high to this week's March low.

This move is supported by a bullish crossover of stochastic momentum indicators, as seen on the lower study of this chart while in oversold-territory of the chart, which could spell the beginning of a trend higher, a signal that has already appeared on the daily chart.

The first study points to a bullish old-crop/new-crop spread, ending at EUR12.25 this week (May trading over the September). Over the past three years, this spread was inverted on this day on two of the three years, while the largest inverse was EUR1.50. The three-year average is calculated at minus EUR.83 (September trading over the May) on March 15.

European commentary would indicate that wheat from France may have largely filled this week's 450,000 mt tender into Algeria, while is well-positioned to meet demand in coming months. At the same time, European analyst Strategie Grains left its forecast unchanged for E.U. cereal grain production in 2019, with soft wheat production expected to increase 15% to 146.1 million metric tons.


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