Wheat futures are usually traded on the Chicago Board of Trade (CBOT) and the CME Group. CBOT is the oldest while CME Group operates the largest futures and options exchange. Both of these exchanges deal in US wheat futures, while the Intercontinental Exchange (ICE) deals with UK wheat futures, but they all offer various other soft commodities.
When trading wheat futures, remember that the standard trading unit is 5,000 bushels, and the quoted price is in price per bushel. Markets will be open from Monday to Friday between 8:30am and 1:15pm Central Time and from Sunday to Friday between 7:00pm and 7:45am Central Time.
The short-term view on wheat seems to be bearish now that wheat futures prices have crossed and closed below the 50-day SMA. This indicates that the 38.2% Fibonacci level acted as a resistance level, and there may be a short-term downtrend. The move might take prices to the 61.8% Fibonacci level at $420. Afterwards, we may see prices rebound and rise back to the previous high around $460.
However, since the price of wheat futures is still trending above the 100 and 200-day SMAs, this is a sign that the uptrend that started back in January may still be in effect. The stochastic and RSI indicators show the markets are in oversold conditions, and that the downtrend may only be temporary. The current downtrend started yesterday on the 20th of March with an engulfing candlestick that pushed prices lower from last week’s close
On the 1-hour and 4-hour charts, though, there is a strong bearish momentum with the prices trending below all moving averages. And this goes to back the short-term bearish sentiment for wheat futures.
Wheat futures are usually affected by the strength of the US dollar, which is weakening at the moment. A weaker dollar improves the exportation of wheat, boosting the price of wheat, as long as all other factors remain equal. However, expectations of rain has reduced the impact of the weaker dollar, as the markets expect an abundance of supply by winter.
The current weather forecast shows that the rains will be more widespread than in previous seasons, leading to the expectation of increased supply. Long-term forecasts also show favourable weather, which is also affecting wheat futures for July and September contracts. These weather forecasts have been key to driving down wheat futures prices for the May contracts, although the effect of weather may only be temporary.
On the other hand, the downtrend may not be as long-lasting as you may imagine due to great weather. Lower wheat prices have got farmers worried, and some may be considering switching to other grains like corn and soybeans which have a higher value. A report by CoBank has indicated this worry among farmers, which may signal that despite great weather, production of wheat may actually decrease. With increased consumption of wheat due to the lower prices and the possibility of less wheat production, the long-term view of wheat futures may actually be positive.
Predictions for the May 2017 wheat futures
The technical show a bearish short-term outlook, which should tell you to short wheat futures this week. On the fundamental side, though, the price of wheat might recover, and this is even backed by long-term technical analysis. Therefore, you should open long positions targeting previous highs of $460 on the long-term but short wheat futures in the short term.