Technical Analysis for FCPO, FCPO Daily Chart Source: OPF Charting System
Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives declined this week due to lower palm oil export demand for December and the prospect of larger soybean production in South America.
The benchmark FCPO March contract fell RM27 or 1.08 per cent to close at RM2,467 per tonne on Friday from RM2,494 per tonne last Friday.
The trading range for the week was from RM2,433 to RM2,524.
Total volume traded for the week amounted to 145,262 contracts, up 39,662 contracts from the previous week.
The open interest as at Thursday decreased to 164,839 contracts from 166,198 contracts the previous Thursday.
The crude palm oil prices wrapped up the year in a 21 per cent decline in 2012 compared to a 16 per cent fall in 2011 due to record high palm oil stocks, strong production and sluggish export demand.
The US soybean oil prices on the other hand fell five per cent in 2012, lesser than the 10 per cent decline in 2011 as the US experienced the worst drought in 56 years during summer.
The NYMEX crude oil prices was also facing the same fate as other commodities and was down seven per cent in 2012 against the gain of eight per cent in 2011 due to a slower global economic growth.
Cargo surveyor ITS revealed its palm oil export figures for the full month of December on Monday at 1,568,510 tonnes, a drop of 5.69 per cent while another surveyor SGS at 1,518,750 tonnes, a fall of 7.85 per cent from the same period last month.
The growth in exports for December was mainly contributed by India and Pakistan.
However, the slump in demand from China, European Union countries and the US was far exceeded the increase in demand from India and Pakistan.
Hence, the exports data for the first 10 days in January will be an important indication as to see the response of the demand after the implementation of zero per cent export tax for crude palm oil in January by the Malaysian government.
In addition, traders would also monitor the impact on palm oil demand from China after the Chinese government has imposed stricter quality standards on the imported edible oils starting from January 1.
The weather in South America was forecasted to be favourable in the coming week.
Some analysts also estimated the US Department of Agriculture (USDA) to raise its soybean production in 2012 and to expect a record high of soybean crops in Brazil in the coming report.
All these factors would pressure on soybean prices and may dampen the upward momentum of crude palm oil prices.
On the economic front, the US government has finally averted the fiscal cliff issue at a very last minute before the New Year.
Technical View
The benchmark March contract consolidated this week and was waiting for clearer direction from the major fundamental reports to be released next week.
The EMA 50 and the uptrend channel support line will be closely monitored as to determine the strength of the current upward momentum.
Resistance would be pegged at RM2,615 and RM2,755 while support was set at RM2,430 and RM2,350.
Major fundamental news this coming week
MPOB’s monthly supply-demand report on January 10, Malaysian export data for January 1 to 10 by ITS and SGS on January 10 and USDA’s monthly supply-demand report on January 11.
Oriental Pacific Futures (OPF) is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives. You may reach us 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.