Technical Analysis for FCPO / FCPO Daily Chart Source: BursaStation Professional
Malaysian palm oil futures rose 0.98 per cent for the week as exports recovered to support market although gains were limited by concerns over demand in the world’s second largest importer China.
Crude palm oil futures (FCPO) settled at 2,660, which was up 26 points from 2,634 last Friday.
Trade was lacklustre throughout the week where volume decreased to 134,193 contracts from 167,709 contracts total last week.
Moreover, open interest based on Thursday decreased to 187,970 contracts from 191,772 contracts last Thursday. Meanwhile, for the first 20 days of April, cargo surveyor Intertek Testing Services (ITS) reported an unexpected 5.9 per cent decline at 722,170 tonnes compared to the first 20 days of March at 767,785 tonnes.
Cargo surveyor Société Générale de Surveillance (SGS) too reported a six per cent decline in export figures at 717,842 tonnes compared to the first 20 days of March at 763,363 tonnes.
However, export recovered for the first 25 days of April where ITS reported a 3.4 per cent rise at 958,815 tonnes versus March’s first 25 days at 927,290 tonnes.
SGS reported a rise of 3.4 per cent as well at 965,446 tonnes versus March’s first 25 days at 933,593 tonnes. Trading was subdued as market was still undecided which direction it should take.
On one hand, many traders expected demand to rise as importers like India, Pakistan and Middle East will restock palm oil to celebrate the Ramadhan in late June which is also followed by Eid al-Fitr celebrations in July.
Moreover, the weakness in ringgit helps to support the market.
On the other hand, many traders were concerned about the slowdown from China as the country’s economy had expanded 7.4 per cent for the first quarter of year 2014; which is the slowest pace in 18 months. This could prompt the authorities to act for the second time in numerous weeks, to boost up growth.
Throughout the week, spot rate ringgit weakened to as high as 3.2755 on Friday. Dollar strengthened against many Asian currencies amid tension in Ukraine and improvement in some US economic data.
Meanwhile, China’s yuan was among the weakest currency performer as poor economic data results dampened the appetite for the currency.
Technical View
From a technical analysis perspective, throughout the week the trade range is limited between 2,640 and 2,670 albeit bias to the upside.
Price did rebound from a low at 2,612 on Monday after it broke a key support at the 2,620 level but price is also capped at the 2,680 region due to fundamental reasons and lack of initiative from traders of both sides which can be seen by the weekly volume itself.
As we can see from the chart based on Thursday’s candlestick, it rebounded when it touched the EMA-100 moving average line.
For the time being, we will use the EMA-100 moving day average as our key support level.
Should price violate below this support level, then only we will focus on the EMA-200 moving day average which is at 2,585. We still believe that the market has the potential to rise up further to continue the bull trend but price needed to break above the 2,680 to 2,700 level to support our view for the time being.
Meanwhile, we also draw a small triangle which signifies that should market breaks either way a big and intense possible movement may follow afterwards so we do advised traders to watch this range carefully as the movement within the triangle itself is getting narrower.
The Fibonacci Projection line (horizontal yellow line) will be our expected rebound level.
Key support levels are pegged at 2,640, 2,610 and 2,585-70. Key resistance levels are pegged at 2,670, 2,690-2,700 and 2,730-40.
Major fundamental news this coming week
MPOB, ITS and SGS report on April 30 (Wednesday). You may reach us at www.opf.com.my.
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.