Technical Analysis for FCPO / FCPO Daily Chart Source: BursaStation Professional
Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives rebounded to a positive note at the end of the week. Earlier this week, FCPO futures fell to 2,324 affected by the bearish USDA soybean report last week and also the possibility of a rise in output in the upcoming Malaysian Palm Oil Board (MPOB) report to be released on July 10, after the futures market’s morning session closed.
The futures market rebounded, as the drawdown in stocks and rise in export might help offset the concern on palm oil rising output.
According to Reuters Poll, MPOB is expected to see stocks ease 4.2 per cent from a month ago to 1.74 million tonnes in June, the sixth straight monthly drop as demand for the edible oil continued to outstrip supply.
Output in the world’s second largest palm oil producer rose six per cent in June from the previous month, which is its biggest jump this year, to 1.47 million tonnes which may suggest the start of a higher production cycle in the second half of the year. Production fell short of the 1.59 million tonnes of total demand represented by exports and local consumption. Demand for exports rose 2.7 per cent to 1.45 million tonnes in June as buyers from India and Pakistan stocked up in preparations for the Muslim Ramadan festival in July. Cargo surveyor data showed that China is the world’s largest palm oil buyer after India.
The median of the figures provided by the poll respondents imply that domestic consumption in June were around 143,751 tonnes. Malaysia’s imports of CPO from Indonesia was set to gain 50,000 tonnes in June from 15,815 tonnes in the previous month.
The benchmark FCPO September contract settled at RM2,385 per tonne on Friday, up 41 points from last Friday at RM 2,344. The trading range for the week was from RM2,324 to RM2,387. Total volume traded for the week was 157,144 contracts, up only 860 lots/contracts from previous week. The open interest as of Thursday rose 4,923 lots/contracts to 180,389 from 175,466 contracts from previous Thursday.
Cargo surveyor ITS released palm oil export figures for June 1 to 30 on Monday at 1,350,311 tones, a rise of seven per cent (May at 1,262,281 tonnes) while surveyor SGS reported export at 1,315,698 tonnes, a rise of 5.4 per cent from the same period last month (May at 1,248,014 tonnes). Weaker demand post-Ramadan and upcoming rise in production could depress palm prices. US dollar rose due to positive economy outlook which may affect the palm oil export.
Clear signals of looser policy from central banks in UK and Europe on Thursday sent the euro to a five-week low, lifted bond prices and gave a boost to share markets. US markets were also up for the week last Friday, of which positive job outlook had boosted Dow Jones Industrial Average to 1.5 per cent for the week.
This may have a positive affect across global equities and commodities but investors should also be cautious about the tapering of the third quantitative easing which could begin earlier should the US economy improve.
Meanwhile, US commodities rallied with oil topping US$100 per barrel for the first time since September on concerns about Egyptian unrest and tight supplies.
Technical View
Price rebounded from the low at 2,324 where it saw the Fibonacci retracement at 61.8 per cent level. A rebound from that level could mean a significant rebound should the price fail to break and close below the 61.8 per cent level. For the week, we pegged our important support levels at 2,360, 2,330 and 2,300.
Meanwhile, for our resistance levels, we pegged important ones at 2, 400 and 2,440 to 2,450 levels. Investors and traders are advised to watch for fundamental news in the coming week.
Major fundamental news
Malaysian export data for June 1 to 10 by ITS and SGS on July 10. MPOB export report data for July 10.
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