Morning Futures Roundup

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Beans Keeping Other Grains Above Water

   Fundamentals
China has continued to buy Soybeans from US farmers after South American crops were severely damaged by drought conditions. This could severely stress US old crop supplies, especially if there is anything other than ideal growing conditions. The end result could be the lowest stocks-to-usage numbers since the 1960's. The market has priced-in a substantial reduction in inventory levels for this Thursday's USDA report. The average analyst estimate calls for inventory levels to drop to just below 53 million tons, which would be a reduction of 23% from the prior report. It seems as though the only thing that can cool the market would be a slowdown in purchases from China.

   Technical Notes
Turning to the chart, we see the July Soybean chart turning almost parabolic. Prices easily passed resistance at the 1450 level and are now retracing a bit to retest the level. The next significant resistance level comes in near 1650, which is the record high from 2008. In order for the market to maintain positive technical momentum, prices must successfully hold the test of the 1450 level, which coincides with the uptrend line.

The RSI indicator has recovered from overbought levels, but still remains on the upper end over neutral. Momentum is nearing the zero line, hinting at possible weakness. It is of interest to note that the RSI indicator peaked in March and has failed to keep pace with prices since then. This can be seen as negative, but timing the signal can be very difficult.

  
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