Optimism returns on grain market ahead of important USDA data!

Yesterday grain market reach new highs. The price of corn rose to 680 cents a bushel, soybeans 1570 cents, wheat recorded the largest increases, which we wrote about in yesterday’s  Commodity Wrap. However, during yesterday's session a large portion of gains was erased, and today the trade started with a clear bearish price gap and a strong sell-off took place during the European session. Where did the declines come from?

There is no specific information but this may be because:

• better prospects for corn and wheat production in Ukraine,
• improvement of weather conditions in the United States, which may accelerate sowing and improve the quality of crops
• lower the demand from China for some products (hence stronger growth of wheat due to high corn prices)
• worse export data after last week's very positive surprise (USDA data will be released tomorrow)
• Profit-taking and the escape gap from a technical analysis perspective

Most of the losses were reduced, although not all markets closed the gap. Therefore, it seems that the most serious factor of the sell-off was profit taking as the rumors surfaced. Of course, the markets are very overbought, but there are still many factors that indicate that production will be relatively low. In Ukraine, corn sowing is going very poorly compared to last season. The expectations for the US harvest are also not very high. Nevertheless, China remains the key factor. If China stops buying (which can be seen in export data), a larger correction can be expected.

Wheat has recovered from the European session and is now looking to close the gap. The clear shadow of the candle below the 61.8 retracement of the downward wave may indicate that the bulls did not give up so easily. Source: xStation5

Corn is also trying to close the gap. If buyers manage to end the sessions above yesterday's candle body, then an upward signal will appear on the chart. Source: xStation5