WHEAT/RUB Technical Analysis: 9-26-17
IFC Markets | Sep 26, 2017 09:32AM ET
In this review, we suggest considering the personal composite instrument (PCI) "Wheat vs. the Russian ruble." It increases in case of the wheat price growth in the world market and the weakening of the Russian currency. Will the WHEAT/RUB price to increase?
Wheat prices are growing amid weather deterioration in South America and drought in Australia. The Australian government expects that the crop could be minimal for the past 8 years in 2017/18 season and amount to 21.64 mln tonnes. This is much less than the record wheat crop of 35.13 mln tonnes in Australia last year. At the same time, there is an increased world demand for the Russian grain. According to the Ministry of Agriculture of the Russian Federation, Russia exported 8.03 mln tonnes of wheat from July 1 to September 20, 2017, which is by 21.9% more than in the same period of the last 2016/17 season. The Russian ruble may weaken in case of the decline in the Bank of Russia's key rate at its next meeting on October 27, 2017. It is 8.5% and markedly exceeds the inflation, which is currently 3.3%.
On the daily timeframe, WHEAT/RUB: D1 came out of the downtrend and is trying to exceed the 200-day moving average line. The further price increase is possible in case of the decline in the Bank of Russia’s rate and the reduction of the world wheat crop.
- The Parabolic indicator gives a bullish signal.
- The Bollinger® bands have narrowed, which means lower volatility.
- The RSI indicator came out of the oversold zone and started to rise. No divergence.
- The MACD indicator gives a bullish signal.
The bullish momentum may develop in case WHEAT/RUB exceeds the upper Bollinger band at 27000. This level may serve as an entry point. The initial stop loss may be placed below the three last fractal lows, the local low and the Parabolic signal at 24700. After opening the pending order, we shall move the stop to the next fractal low following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop loss moving it in the direction of the trade. If the price meets the stop level at 24700 without reaching the order at 27000 we recommend cancelling the position: the market sustains internal changes that were not taken into account.
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Summary of technical analysis
Position - Buy
Buy stop - above 27000
Stop loss - below 24700
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