Technical Analysis for FCPO / FCPO Daily Chart Source: BursaStation Professional
Malaysian palm oil futures (FCPO) ended 0.01 per cent higher for the week on Friday.
FCPO rebounded from their losses to post their first weekly gain since mid-March as it was helped by optimism that a recovery in demand and tighter stocks will underpin prices.
FCPO settled at 2,658 and volume decreased to 231,906 contracts compared to last week at 289,213 contracts.
Open interest based on this Thursday increased to 188,715 contracts compared to last week at 188,233 contracts.
For the first 31 days of March, Cargo Intertek Testing Services (ITS) reported a 3.1 per cent drop in export figures at 1,205,010 tonnes compared to the first 28 days of February at 1,244,101 tonnes.
Cargo Société Générale de Surveillance (SGS) too reported a 3.4 per cent drop in export figures at 1,200,338 tonnes for the first 31 days of March compared to first February’s 28 days at 1,242,066 tonnes.
Overall, market players are anticipating Malaysia’s palm oil exports for March to be weaker than a month ago as major consumers trimmed back purchases.
Market participants are anticipating demand to kick-in from April as buyers begin to restock ahead of the Muslim fasting month of Ramadan and the Eid al-Fitr festival which typically drives up consumption of the tropical oil.
The Islamic holy month starts late June this year.
However, traders and industry officials warn that India, which is the world’s biggest edible oil importer, would cut back on palm imports this year in favour of other cheaper oils as price spreads make the tropical oil less attractive.
Price spread currently trades at about a US$20 discount to soy oil, narrower than around US$45 at the start of this year and from US$300 early 2013.
A Reuter’s poll showed that Malaysia’s palm oil inventory is likely to drop to 1.58 million tonnes down five per cent from February’s 1.66 million tonnes in March as crop-damaging dry weather continued to curb yields although weak demand for the tropical oil prevented a steeper drawdown in inventories.
Malaysia is likely to produce 1.39 million tonnes of CPO in March which was up nine per cent from February and below a 10 to 12 per cent rise estimated by some of the survey participants.
Malaysian exports of palm oil products in March were seen at 1.3 million tonnes which was down 3.7 per cent from February.
Technical view
From the chart, price had violated below the trend support line (green line) and EMA 100 day moving average line (blue) where it went to as low as 2,597 on Thursday.
However, price managed to rebound back and closed above the EMA 100 day moving average line at 2,659.
Currently, we are monitoring whether the price action for the week is considered as a false break or able to hold well at the current level.
For the price to go up further, it must break and stay above the 2,670 level.
If it is unable to do so; price may fall and retest below 2,600 level again.
For the coming week we pegged our important support levels at 2,640, 2,600 and 2,580-75.
Meanwhile, for our resistance levels, we pegged important ones at 2,670-80, 2,750 and 2,800.
Major fundamental news this coming week
MPOB, ITS and SGS report on April 10 (Thursday).
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.