In the past 11 weeks, the November contract has reached a high of $8.98 per bushel on Feb. 2 and then again on March 7. Today's move higher of 3 1/2 cents to a close at $9.00 3/4 per bushel indicates a breakout from this range after closing higher for seven consecutive sessions.
Today's move also saw a close above psychological resistance at $9.00/bu. as well as a close above the November contract's 200-day moving average at $8.99 1/2/bu., the first such close since Dec. 4. Note the Dec. 4 close on the attached chart, which was followed by a 22 3/4-cent selloff in the next session on Dec. 7.
Today's high also came within 1/4 cent of testing Fibonacci resistance at $9.01 1/2/bu. (horizontal red line), which represents the 38.2% retracement of the move from contract's July 14 high of $9.85/bu. to the contract's $8.50/bu. low reached on Sept. 11. Should this market gain further strength, a further move to the 50% retracement of this same downtrend found at $9.17 1/2/bu. could be the next target.
The middle study shows momentum indicators on the short-term daily chart climbing rapidly into overbought territory above 80%, which could lead to a sudden change in direction resulting in a move lower.
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The lower study indicates a less bearish sentiment held by commercial traders, with the Nov/Jan spread narrowing to minus 4 1/2 cents (January trading above the November, narrowing from a low of minus 5 3/4 cents on March 3 to the narrowest this spread has traded since Feb. 23.
It is interesting that this move comes at a time when the U.S. ending stocks estimate is seen increasing, which in turn becomes beginning stocks for 2016/17. Focus also remains on both the record-sized crop currently being harvested in Brazil, whose government increased its estimate for the size of Brazil's crop today to 101.18 million metric tons. Despite this, old-crop futures are also on the verge of breaking out of their 11-week range, with today's high falling just 1/2 cent below the range high.
Canadian producers should watch this future along with price action in the Canadian dollar for pricing opportunities. Bids reported for the Ontario market ranged from $11.25/bu. to $11.76/bu. for Thursday, while both the spot and December Canadian dollar showed signs of weakness today which could result in a change of the loonie's short-term trend and could lead to strengthening basis, as demand remains solid. As of January Statistics Canada data, Canadian cumulative exports were 12.9% above the September-through-January period in 2014/15 while 18.2% above the three-year average. Canadian crush also remains ahead of the pace needed to reach the current crush target of 2 mmt.
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