Wheat Rallies on Ukraine Concerns

Today’s Spotlight Market
Both large and small speculators have been holding net-short positions in Chicago Wheat futures according to the most recent Commitment of Traders report.? Non-commercial traders were net-short just over 18,000 contracts for the week ending February 25th. This was down over 15,000 contracts for the week, and it appears that these large speculators were already in a short-covering mode prior to the ?spike? in prices starting Sunday evening.


The escalation of tensions in Ukraine has affected a number of global futures markets including Wheat futures, as traders fear a potential slowdown of grain exports from the Black Sea region. Ukraine is ranked 5th among the leading Wheat exporting nations, with an estimated 10 million tons of Wheat expected to be shipped in 2014. However, the recent collapse of the nation?s currency, the hryvnia, against the U.S. Dollar may cause many Ukrainian grain producers to withhold grain sales — at least until some stability in the value of the hryvnia occurs. Lower than expected Wheat exports from the Black Sea region could help export sales from both the U.S. and Europe, as traditional buyers in both the Middle East and North Africa may be forced to look towards the west to obtain needed Wheat supplies. On the other side of the coin, we have heard from some traders who believe the Ukrainian uprising will cause the nation to accelerate grain sales to obtain much needed hard currency.? If true, this could be a bearish development for Wheat as well as Corn prices, at least in the near-term.


Technical Notes? -? View Today’s Chart
Looking at the daily chart for May Wheat, we notice prices rebounding off the Jan 30th low prior to the ?gap? higher opening on Sunday. It appears that speculators were caught short the Wheat market, causing the sharp rally to start the week as traders exited short positions. Prices have now moved above the 20-day moving average (MA) but still have some upside headwinds to overcome before testing the longer-term 200-day MA which is currently near the 665.00 price level. The 14-day RSI is strong, with a current reading of 64.58. Significant chart resistance is found near the 654.00 price level, with support seen at the February 27th low of 588.25.


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