Technical analysis for FCPO / FCPO Daily Chart Source: BursaStation Professional
Malaysian palm oil futures closed slightly higher at 0.12 per cent for the week although price fell from a four-day gain on Friday as investors took profits ahead of the weekend.
However, losses were capped by consumption optimism from the upcoming Muslim celebration.
Meanwhile, Malaysia has kept its crude palm oil export tax for June at 5.5 per cent while top producer Indonesia will decide on its own rate later in May.
Futures crude palm oil (FCPO) settled at 2,580 which was up three points from 2,577 last Friday.
Trading volume was subdued for the week due to Wesak Day holiday on Tuesday where total volume decreased to 117,248 contracts from 161,299 contracts totalled last week.
However, open interest based on Thursday increased to 186,524 contracts from 178,028 contracts last Thursday.
April Malaysian Palm Oil Board (MPOB) monthly report stated last Monday that April’s production increased 3.9 per cent to 1.56 million tones compared to March’s at 1.497 million tonnes.
Inventory increased 4.6 per cent to 1.77 million tonnes compared to March’s at 1.67 tonnes.
On the other hand, export increased 1.2 per cent to 1.26 million tonnes compared to last month’s at 1.25 million tonnes.
Overall, the April MPOB monthly report was more bearish than expected as output and inventory rose higher than expected while export performed lower than expected.
Meanwhile, Intertek Testing Services (ITS) reported on Monday, an increase of 27.7 per cent for the first 10 days of April to 391,856 tonnes compared to March’s first 10 days at 306,765 tonnes.
ITS also reported on Thursday, an increase of 22.5 per cent for the first 15 days of April at 639,414 tonnes compared to March’s first 15 days at 521,847 tonnes.
Following ITS, Société Générale de Surveillance (SGS) also reported an increase in export for the first 10 days and 15 days of April at 386,076 tonnes and 640,101 tonnes respectively compared to March’s first 10 days and 15 days at 306,605 tonnes and 500,057 tonnes, respectively.
Overall, exports were encouraging and met with investors’ expectations for the upcoming festival celebration and its one of the many reasons for the rise in market for the past few days.
Spot ringgit strengthened slightly for the week to 3.225 although it did strengthen to as low as 3.216.
Ringgit strengthened on demand from foreign banks and a strong government bond sale probably due to expectations of a better result for Malaysia’s first quarter gross domestic product (GDP) report.
The strong ringgit was one of the many reasons investors chose to hold back their buying interest as stronger ringgit will discourage demand from overseas where it will be more costly to purchase palm products which is ringgit-denominated.
Technical view
From our technical analysis perspective, the profit taking on Friday is not a confirmation that market is back to either sideway range or bearish market but more of a mini correction after the market rose four times in a row based on the daily chart.
Moreover, the change in contract month from July contract to August contract as May contract expired, illustrated a long negative candle which can be deceptive.
Currently, we draw a small horizontal line which will be our confirmation line on whether market may fall further below to 2,520 to 2,485 level or rise towards the 2,700 level.
At this moment, we’re neutral on the market’s movement as either side has its own strong fundamental reasons.
Current EMA 200 day level is pegged at 2,587.
Key support levels are pegged to 2,570, 2,550, 2,520 and 2485.
Key resistance levels are pegged to 2,630, 2,665 and 2,700.
Major fundamental news this coming week
ITS and SGS report on May 20 (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.