Winter wheat crop has deteriorated in the US
In this review, we suggest considering the personal composite instrument (PCI) “Wheat vs. the Canadian dollar”. It increases when wheat prices rise on the world market and when the Canadian currency weakens. Is there a possibility for WHEAT/CAD prices to rise?
On Tuesday, wheat prices rose by almost 5% after the publication of the weekly overview by the U.S. Department of Agriculture (USDA). The US Department of Agriculture lowered the estimate of winter wheat crop in Texas with a rating of “good to excellent” to 28% from 36% a week earlier. The estimate of crops with a rating of “poor to very poor”, on the contrary, increased to 30% from 24%. Texas is the 2nd largest producer of winter wheat in the US after Kansas. Let us recall that this year, American farmers planted only 31.3 million acres of winter wheat, which is the minimum since 1909. Low prices were the main reason for this. The main negative factor for the Canadian dollar is the risk of a rate cut by the Bank of Canada. However, currently, the probability of such an event in 2019 is estimated not too high - at the level of 20%. The publication of weak statistics may force the Bank of Canada to soften monetary policy. Its rate is 1.75%, which is higher than 1.4% inflation.
On the daily timeframe, WHEAT/CAD: D1 has breached up the resistance line of the downtrend. A number of technical analysis indicators formed buy signals. The further price increase is possible in case of a shortage of wheat.
Summary of technical analysis
Position Buy
Buy stop Above 621
Stop loss Below 572
In this review, we suggest considering the personal composite instrument (PCI) “Wheat vs. the Canadian dollar”. It increases when wheat prices rise on the world market and when the Canadian currency weakens. Is there a possibility for WHEAT/CAD prices to rise?
On Tuesday, wheat prices rose by almost 5% after the publication of the weekly overview by the U.S. Department of Agriculture (USDA). The US Department of Agriculture lowered the estimate of winter wheat crop in Texas with a rating of “good to excellent” to 28% from 36% a week earlier. The estimate of crops with a rating of “poor to very poor”, on the contrary, increased to 30% from 24%. Texas is the 2nd largest producer of winter wheat in the US after Kansas. Let us recall that this year, American farmers planted only 31.3 million acres of winter wheat, which is the minimum since 1909. Low prices were the main reason for this. The main negative factor for the Canadian dollar is the risk of a rate cut by the Bank of Canada. However, currently, the probability of such an event in 2019 is estimated not too high - at the level of 20%. The publication of weak statistics may force the Bank of Canada to soften monetary policy. Its rate is 1.75%, which is higher than 1.4% inflation.

On the daily timeframe, WHEAT/CAD: D1 has breached up the resistance line of the downtrend. A number of technical analysis indicators formed buy signals. The further price increase is possible in case of a shortage of wheat.
- The Parabolic Indicator gives a bearish signal. It can be used as an additional resistance level that should be overcome before opening a buy position.
- The Bollinger bands have widened, which indicates high volatility. Both Bollinger bands are titled down.
- The RSI indicator is below 50. It has formed a positive divergence.
- The MACD indicator gives a bullish signal.
Summary of technical analysis
Position Buy
Buy stop Above 621
Stop loss Below 572