Crude Palm Oil Futures (FCPO) on Bursa Malaysia Derivatives fell below the psychological level of 2,300 and nearly touched the psychological support level of 2,220 where the lowest of the weak touched 2,222. Malaysian palm oil futures fell 1.5 per cent on Friday as worries persisted over slowing export demand and higher output in the second half of the year.
Cargo surveyor Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products for July 1 to 15 fell 22.8 per cent to 547,857 tonnes from 709,860 tonnes during June 1 to 15. Meanwhile, cargo surveyor Societe Generale de Surveillance (SGS) reported that exports of Malaysian palm oil products for July 1 to 15 fell 24.1 per cent to 536,391 tonnes from 707,148 tonnes shipped during June 1 to 15.
Looking at both export reports from both ITS and SGS, the demand side dwindled as weaker demand post-Ramadan and the upcoming rising production depressed palm prices for the week. The possible high seasonal production cycle in the second half year will raise expectation that the inventory levels may pick up in the coming months. Price did rebound from the low of 2,222 as most traders believed that price went way too low, hence the buying interest. However, the gain was capped as fundamental fears still linger in the market.
Meanwhile, the US dollar went higher following last week slide even as the Federal Reserve stated that stimulus is not expected to cut early as the investors expected. A higher greenback against the ringgit makes the palm cheaper for overseas buyers and refiners.
The benchmark FCPO October contract settled RM2,257 per tonne on Friday which was down 44 points from last Friday at RM2,301. FCPO September contract becomes the second month as FCPO October futures contract becomes the benchmark month. The trading range for the week was from RM2,302 to RM2,222. Price was mostly bearish for the week with the exception on Thursday where speculative buying interest emerged as FCPO price fell low throughout the week.
Total volume traded for the week amounted to 200,787 up 27,614 contracts compared with last Friday’s 173,173 contracts. The open interest as of Thursday increased 16,020 contracts to 197,962 from 181,942 contracts from previous Thursday.
Technical View
From the chart, price continued to fall and it broke last week previous support line. Selling continued till it almost revisited the previous bottom of 2,220. In the chart, we also draw the resistance line (red line) and support line (green line) whereby we believed that should price refuse to break below the support line, market may for the time being, stay in the consolidated range which began last year October.
For the coming wee,k we pegged our important support levels at 2,250, 2,220 and 2,200. Meanwhile, for our resistance levels, we pegged important ones at 2,300, 2,320 and 2,350 level.
Major fundamental news this coming week
Malaysian export data for June 1 to 20 by ITS and SGS on July 22 (Monday).
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.