Paris Wheat May Drop on Fibonacci Breach: Technical Analysis

Milling wheat may reach the lowest level in more than a year in Paris trading if futures breach a so-called Fibonacci resistance level, according to technical analysis by Arnaud Saulais at Starsupply Commodity Brokers.

Futures for delivery in November on NYSE Liffe are near resistance of about 205 euros ($268) a metric ton, representing a 23.6 percent retracement between November’s high and the contract’s all-time low in May 2012, said Saulais, a broker at Starsupply in Nyon, Switzerland. That’s one of the levels singled out in Fibonacci analysis. If prices slide further, the decline may extend to about 191 euros in the next month, the contract’s low and the least for most-active futures since February 2012, he said.

The November contract is down 15 percent at 211.50 euros since reaching a peak at 249.75 euros on Nov. 9 as output in the European Union and the former Soviet Union is set to rebound after dry weather last year. Concern about slow planting progress for U.S. spring grain crops after rains this year kept prices from falling further, Saulais said. U.S. farmers finished planting 23 percent of spring wheat as of May 5, down from 82 percent at the same time a year earlier, U.S. Department of Agriculture data show. They sowed 12 percent of corn, down from 69 percent in 2012.

“If planting improves at the end of this week and next week, prices could go down,” Saulais said in a telephone interview yesterday. “Maybe milling wheat will cross the 205 level. We are still in a bearish condition because production in eastern Europe looks quite good and conditions in western Europe are quite good as well.”

EU Harvest

World production of wheat may climb to 680 million tons, up 3.8 percent from a year earlier, the International Grains Council said April 25. The soft-wheat harvest in the EU, the world’s top grower, may be 129.7 million tons, increasing 5.2 percent from the prior season, the European Commission said April 26. The USDA is set to release its first estimates for the next U.S. and world harvests on May 10.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes. Fibonacci analysis is based on a theory that prices tend to drop or rise by certain percentages after reaching a high or low.

To contact the reporter on this story: Whitney McFerron in London at wmcferron1@bloomberg.net.

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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