Malaysian palm oil futures ended in a positive state for the second consecutive day on Thursday, the last business trading day for the week as traders short-covered ahead of a long weekend holiday as well as in view of a favourable ringgit currency.
Meanwhile, Malaysian palm oil futures dropped to their lowest in almost two weeks on Monday and Tuesday as it was hit by a decline in other vegetable oil prices and fragile equity markets.
The new benchmark crude palm oil futures (FCPO) April contract settled at RM2,559 per tonne on Friday which was down by 32 points from last Friday at RM2,591.
The trading range for the week was from RM2,581 to RM2,519.
Benchmark palm prices had fallen 3.8 per cent this month which was its biggest monthly loss since September last year, as investors worry over sluggish export demand which would fail to reduce palm stocks in the world’s second-largest producing nation.
However, some traders forecasted that demand would rise in the coming months as winter fades and the weather becomes warmer where northern winter had buyers cut down their purchases of palm which solidifies in cold temperatures.
On Monday, Cargo surveyor Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products from January 1 to 25 fell 9.4 per cent to 1,032,104 tonnes from 1,139,705 tonnes shipped during December 1 to 25.
Meanwhile, Cargo surveyor Societe Generale de Surveillance (SGS) reported that exports of Malaysian palm oil products for January 1 to 25 fell 10.5 per cent to 1,017,662 tonnes from 1,137,374 tonnes shipped during December 1 to 25.
Malaysia’s ringgit has weakened even further to 3.3465 against the dollar as it had been hit by worries over China’s slowing economy and further stimulus cut by the US Federal Reserve.
A weaker ringgit improved margins for overseas buyers and refiners where it lifted demand for palm oil, which is used in a variety of household products from soaps to cookies and chocolate.
Technical view
From the chart, price declined to the 2,519 after it failed to test the 2,605 range.
However, price managed to rebound and form a long positive candle, hence we still draw the resistance line which is to be monitored.
If price is unable to rise further to test that resistance level, we expect price will re-test the 2,519 low-level it made last Tuesday.
For the coming week, we pegged our important support levels at 2,520, 2,485 and 2,420.
Meanwhile, for our resistance levels, we pegged important ones at 2,605, 2,670 and 2,690.
Major fundamental news this coming week
ITS and SGS Export reports – January 31 (Tuesday, February 4).
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.