Technically Speaking

The Dollar Index made another new high last Thursday before selling off and closing lower Friday. The market pattern established Friday is called a "bearish engulfing bar" -- a possible trend reversal signal. According to Japanese Candlestick charting, such a reversal pattern and sell signal are only valid if followed by a lower close the next day. Early Monday, the dollar is again lower, giving confirmation of a sell signal with a lower finish. It seems strange the dollar would be fading ahead of the likely July 27 rise in interest rates. However, it is a futures market, and the subsequent rate increase may have already been factored into price. How far can the U.S. Dollar Index go down in light of the impending rate increases ahead and the prospect of safe haven buying in the dollar? Probably not very far and it would appear the $105 area (currently $107) would be the first area of support. The break could have a bullish influence on grains and soybeans.

Kansas City September wheat futures aren't the only casualty of the meltdown of outside energy and financial markets, as corn and soybeans also plunged. However, now with the dollar stabilizing and moving lower, that could be a good omen for Kansas City wheat. This is a market that through Friday had lost $5.60 per bushel from the mid-May high, without the fundamentals to justify such a move. In that time, wheat fundamentals have likely become even more bullish, with India's crop moving smaller, drought in Argentina lessening that crop, and Russia, despite what could be a record crop, having troubles securing vessels and insurance in the war-torn Black Sea region. Kansas City September has a major support level just below at $8.20 to $8.50. I would look for this market to stabilize, if not move sharply higher at some point, due to tight major exporter stocks and diminished hope we could see any significant Ukraine wheat shipments any time soon.

These two, major veg oil markets have been beat up of late, falling sharply since the first week in June. While being extremely oversold, both markets have shown signs of bottoming out in the short-term. Momentum indicators have started to turn higher, suggesting the correction could continue. The recovery in crude oil futures is no doubt helping the veg oil markets, as biodiesel usage is expected to pick up as new plants come online. If the weather forecast ahead is correct, we could see more dramatic moves to the upside in soybeans, dragging products higher as well.

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Comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of grain or grain futures or options involve substantial risk and are not suitable for everyone.

Dana Mantini can be reached at Dana.Mantini@DTN.com

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