EU wheat steady with euro support as Chicago rally ebbs

PARIS, Jan 29 (Reuters) - European wheat futures edged up on Thursday as an easing euro underpinned the market while support from a rally in Chicago faded, traders said.

March milling wheat BL2H6 on Euronext was up 0.5% at 191 euros ($228.25) a metric ton by 1705 GMT, continuing a recovery from the 187 euro five-week low hit on Tuesday.

The front-month contract gained extra impetus from short-covering by investors, with deferred positions little changed.

The euro EUR= slipped further against the dollar as the U.S. currency continued to recover from Tuesday's four-year low against other major currencies. FRX/

A stronger euro makes western European grain more expensive for export, adding to difficulties in the face of competition from Argentina in Morocco, the main export market for EU grain.

Chicago wheat Wv1 pared gains after reaching an eight-week high. Traders said a pullback in shares and precious metals removed support for grain markets that had been buoyed by the dollar's slide earlier in the week. GRA/

"Wheat has technical momentum, but rallies will be tested by burdensome stocks and exporter competition," British merchant ADM Agriculture said in a note.

"Sustained upside likely requires a confirmed weather event or further dollar weakness; otherwise, volatility rather than trend may dominate near term."

Argentina remained the world's cheapest high-volume wheat origin, traders said.

Argentine 11.5% protein wheat for February shipment was around $215-$219 a ton free on board (FOB) on Thursday.

Russian and Ukrainian wheat were both around $223-$227, with French and Romanian both about $8-$9 over Russian/Ukrainian levels depending on Euronext and exchange rate moves.

“There are no signs of big rises in prices for later Argentine shipment prices, with April shipment quoted only around $2-$3 over February levels,” the German trader said.

“Belief is intensifying that the last Algerian purchase in its January tender is likely to be supplied with Argentine wheat because of higher Black Sea wheat prices, especially Romanian.”

After snow coverage limited risk to U.S. and Russian wheat crops from extreme cold in the past week, trader attention was turning to more deep frosts forecast in the Black Sea region.

Temperatures as low as minus 30 degrees Celsius (minus 22 degrees Fahrenheit) are forecast for Ukraine at the beginning of next week, potentially threatening winter crops lacking snow cover, agricultural analysts and the national emergency service said on Thursday.

($1 = 0.8368 euros)

(Reporting by Gus Trompiz in Paris and Michael Hogan in HamburgEditing by David Goodman)

((gus.trompiz@thomsonreuters.com))