Technical Analysis for FCPO / FCPO Daily Chart Source: BursaStation Professional
Malaysian palm oil futures fell 2.4 per cent for the week on Friday as it followed weakness in competing edible oil markets, while sluggish export data and improving weather conditions also placed pressure on prices.
Futures crude palm oil (FCPO) settled at 2,729 where palm prices were also pressured by losses in competing overseas soyoil markets.
The US soyoil contract for May contract fell 1.2 per cent in late Asian trade on Friday while the most active September soybean oil contract on the Dalian Commodities Exchange which shed one per cent.
For the first 15 days and 20 days of March, Intertek Testing Services (ITS) reported that there was a drop in export figures at 480,730 and 767,785 tonnes respectively compared to the first 15 and 20 days of February at 606,190 and 875,091 tonnes.
Societe Generale de Surveillance (SGS) too reported a drop in export figures at 468,855 and 763,363 tonnes for the first 15 days and 20 days of March respectively, compared to February’s at 595,125 and 867,901 tonnes.
Despite the fall in price, leading analyst Dorab Mistry said benchmark palm oil prices could rise to RM3,000 in April if the El Nino weather pattern returns to curb yields from trees, which have already been stressed by dry weathers.
Moreover, Malaysian palm oil refiners are reportedly cutting production with some plants running at half their capacity as the prolonged dryness in the Southeast Asian country reduced feedstock availability.
Meanwhile, some traders believed that demand for palm oil will be picking up in the coming 10 days, ahead of an expected export tax rises for April and as buyers re-stock before the Muslim festival of Eid al-Fitr.
Malaysian ringgit weakened throughout the week to 3.307 as US Federal Reserve chief Janet Yellen suggested last Wednesday that the US central bank could end its bond-buying programme this fall, and could start hiking interest rates around six months later on.
Normally, a weaker ringgit may spur demand from overseas as it is cheaper to purchase palm products.
Technical view
As I mentioned in the previous commentary, price retraced due to it being toppish at the 2,890 level where price was unable to hold above, hence it challenged and broke our previous trend support line which was green previously, but now, it is coloured in red and the thin line signifies that the previous trend support line is invalid for the time being.
Once the price broke our trend support line, price broke below the 2,777 support level and now looking to challenge the 2,720 level, which in this commentary, we drew a green horizontal line for traders to monitor.
Should it violate below the green horizontal line, price may face our longer trend support line (yellow).
However, looking at the longer term perspective, despite the correction, we still believe the correction or profit taking is a must and the bull trend is still intact.
We noticed a lot of bargain hunting activities during the correction phase.
For the coming week, we pegged our important support levels at 2,720, 2,700 and 2,670.
Meanwhile, for our resistance levels, we pegged important ones at 2,777-2,785, 2,850 and 2,916.
Major fundamental news this coming week
ITS and SGS Export reports – March 25 (Tuesday).
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.