Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives tumbled this week on technical correction and profit taking activities.
The benchmark FCPO June contract plunged RM94 or 2.61 per cent to close at RM3,510 per tonne on Friday from RM3,604 per tonne last Friday. The trading range for the week was from RM3,505 to RM3,628.
Total volume traded for the week amounted to 111,391 contracts, up 5,730 contracts from the previous week. The open interest as at Thursday slipped to 120,575 contracts from 120,728 contracts the previous Thursday.
The bulls in the palm oil market finally took a breather later part of the week once there was not much fresh bullish news continuing to feed them at the high price level as most of the bullish news was largely factored in.
The downfall was also exaggerated by the lower than estimate China’s gross domestic product (GDP) released on Friday. The GDP in China expanded 8.1 per cent in the first quarter of 2012, less than the market expectation of 8.4 per cent, sending the global commodities lower as traders worried that the slowdown in the global economic would cut down the demand for the commodities.
The US consumer sentiment index released by the University of Michigan on Friday was unexpectedly weakening in April, pressuring the global commodities and equities lower on Friday.
In addition, the Spanish bonds yield once again increased on Friday before their debt auction next Thursday, pushing the Italian yields higher with them.
These would again highlight the concerns of the investors over the eurozone debt crisis issue next week.
The Malaysian Palm Oil Board (MPOB) released its monthly reports on Malaysian palm oil’s supply and demand for March 2012 on Tuesday with palm oil stocks were lower than the market expectation at 1.959 million tonnes, a drop of 4.99 per cent from the previous month.
The exports in March jumped 10.84 per cent to 1.343 million tonnes while the palm oil production rose 2.13 per cent to 1.211 million tonnes.
Cargo surveyor ITS released the palm oil export figures for the period of April 1 to 10 the same day at 478,948 tonnes, an increase of 7.81 per cent while another surveyor SGS at 488,758 tonnes, a rise of 8.95 per cent from the same period last month.
The bullish MPOB reports gave a knee-jerk push up on palm oil prices on Tuesday but the bullish sentiment faded later of the week when the US Department of Agriculture reports released on Tuesday night were widely anticipated and the bullish factors were largely priced in the rally earlier.
Technical view
The palm oil prices needed a long due correction after rallying non-stop since early February 2012. The benchmark june contract would switch to july on monday.
We believe the market would be strongly supported at RM3,445 to RM3,465 levels based on the current strong fundamental and the trading range would remain in RM3,445/65 to RM3,700/35 with the current scenario until there are new leads in the market.
Resistance would be pegged at RM3,700 to RM3,735 while support was set at RM3,445 to RM3,465.
Major fundamental news this coming week
Malaysian export data for April 1 to April 15 by ITS and SGS on April 16 and the export figures for April 1 to April 20 on April 20.
Oriental Pacific Futures is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives. They can be reached at www.opf.com.my. Disclaimer: This article is written for general information only. The writers, publishers and OPF will not be held liable for any damage or trading losses that result from the use of this article.