Technical Analysis for FCPO / FCPO Daily Chart Source: BursaStation Professional
Malaysian palm oil futures ended lower on Friday after weaker-than-expected export data increased concerns that demand for the tropical oil has begun to taper, while a stronger ringgit following the Malaysian budget announcement curbed buying interest.
The new benchmark FCPO December contract settled at RM2,444 per tonne on Friday which was up by 43 points from last Friday at RM2,401.
The trading range for the week was from RM 2,419 to RM 2,485. Total volume traded for the week amounted to 170,458 contracts which was up 33,825 contracts compared with last Friday’s 136,633 contracts. The open interest as of Thursday totalled to 155,478 contracts from 159,373 contracts from previous Thursday, a decrease of 3,895 contracts.
For the first 20 days of October, Intertek Testing Service (ITS) reported that export had increased 3.02 per cent to 1,026,488 tonnes compared with the first 20 days of September 2013 at 996,377 tonnes. Société Générale de Surveillance (SGS) reported that export increased 7.96 per cent to 1,051,004 tonnes compared with the first 20 days of September 2013 at 973,512 tonnes.
Meanwhile, for the first 25 days of October, ITS reported that export had decreased 0.6 per cent to 1,231,393 tonnes compared with the previous first 25 days of September 2013 at 1,238,312 tonnes. SGS reported that export had increased 3.8 per cent to 1,259,841 tonnes compared to the first 25 days of September 2013 at 1,213,583 tonnes.
Throughout the week, prices hit their highest at 2,485 on Wednesday before profit-taking activity took place. Overall, price rose 1.8 per cent week-to-week as there was a rumour that output in Malaysia has slowed and would help keep stocks fewer than two million tonnes despite the disappointment noted by one of the export report this Friday.
According to a trader with a local commodities brokerage in Kuala Lumpur, the market could brace further selling, resuming from the fall on Friday due to tapering demand from the future goods and services tax (GST) implementation. However, the GST will only be implemented on April 1, 2015. Meanwhile, Malaysia is set to impose a requirement for biodiesel to use seven per cent palm oil which is up from five per cent previous, as a way of cutting down palm oil stocks and supporting prices in the face of growing competition from other edible oils.
Malaysian ringgit strengthened till 3.1425 on Friday as the government introduced the new consumption tax which will take effect on April 1, 2015. Normally, a stronger ringgit will reduce demand from foreign buyers as they have to pay more to purchase palm oil.
Technical View
From the chart, we drew a strong resistance line where should price break above the line, price may enter a bullish stage. Meanwhile, we also showed an inverted head and shoulder formation which is also supportive to our resistance line.
For the coming week we pegged our important support levels at 2,420, 2,400 and 2,380. Meanwhile, for our resistance levels, we pegged important ones at 2,485, 2,525, and 2,600.
Major fundamental news this coming week
ITS and SGS Export reports – October 31 (Thursday).
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