Weekly Crude Palm Oil Report 21 August 2011

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Technical Analysis for FCPO

Crude Palm Oil Weekly Report By Eunice Choo Crude palm oil futures (FCPO) on Bursa Malay­sia Derivatives ended the week slightly lower due to renewed con­cerns about the global economy growth despite strong palm oil fundamental.

FCPO Daily Chart Source: OPF Charting System

The benchmark FCPO Novem­ber contract fell RM12 or 0.4 per cent to close at RM3,003 per tonne on Friday from RM3,015 per tonne last Friday.

The trading range for the week was from RM2,990 to RM3,083.

Total volume traded for the week amounted to 105,378 con­tracts, down 43,037 contracts from the previous week.

The open interest as at Thurs­day decreased to 131,086 contracts from 134,409 contracts the previ­ous Thursday.

The crude palm oil market started the week higher boosted by strong export demand and trailed the general gains in com­modities.

The market was also supported by the tightness in US soybean supply with the projection of lower soybean output this year.

However, traders were spooked by the health of the global economy after the economic data released in Germany and US for the past week were not in good pictures.

In addition, there was no con­crete plan established to tackle the eurozone debt crisis in the meet­ing between German and French leaders which had increased the anxiety among investors.

There were also talks in the market that some importers in China washed out the palm oil purchase contracts in the past week as the spread between the local and imported prices in China has been widening.

If this persists in the coming weeks, it may cap the increase in palm oil prices.

Both cargo surveyors ITS and SGS released the palm oil export figures for the period of August 1-15 on Monday at 953,852 tonnes (26.83 per cent increase) and 947,594 tonnes (29.48 per cent increase) respectively.

Technical View

Based on the FCPO daily chart, the market managed to rebound to a high of RM3,083 to cover the partial gap as we’ve mentioned last week. The change of benchmark month from October to Novem­ber contract on Tuesday in the daily chart created the disparity of RM34.

The doji closing on Friday showed uncertainties in the market where the buyers and sellers were equal strength. How­ever, this type of closing usually is a continuous movement in the current trend which is moving downwards.

We expect palm oil prices to resume its downward trend pos­sibly to test the previous low of RM2,917 in coming weeks. This view is also supported by the lower closing each week in the weekly chart.

However, if the market man­ages to break above RM3,045 resistance level, it may be able to push up the market to cover the full gap at the major resistance level of RM3,100. Resistance will be pegged at RM3,045 and RM3,100 while support is set at RM2,917 and RM2,800.

Bursa Malaysia Derivatives will increase the margin require­ments for FCPO the third time this month from the current RM7,000 to RM8,500 per contract for non-spot month at the close of business next Thursday (August 25) in conjunc­tion with the long holidays during Hari Raya.

Major fundamental news this coming week

Malaysian export data for the period of August 1 to 20 by SGS on August 22, Malaysian export data for the period of August 1 to 25 by ITS and SGS on August 25 and US annual crop tour reports.

Market expectation on the US annual crop tour reports will be supportive to the market with lower output and yield for both corn and soybean while the expec­tation of the export data for August 1-20 will be 1.17 million tonnes.