Malaysian palm oil futures edged higher on Friday, after few weeks of decline due to weaker local currency which has supported the futures crude palm oil (FCPO) prices.
FCPO benchmark for October 2014 contract settled at 2,284 which was up 19 points or 0.83 per cent from 2,265 last Friday.
Trading volume decreased to 106,004 contracts from 155,374 contracts totalled last week.
However, open interest based on Thursday increased to 223,104 contracts from 218,886 contracts last Thursday.
Intertek Testing Services (ITS) reported that exports of Malaysia palm oil products from July 1 to 31 fell 2.8 per cent on Thursday to 1.354 million tonnes from 1.392 million tonnes shipped during June 1 to 30.
The demand for palm oil has turned weak for the first time after four consecutive reports showed positive signs.
According to ITS, India, European Union and China have imported 367,895, 294,700 and 221,630 tonnes respectively.
Palm oil exports dropped due to China’s reduction in palm oil purchase to 221,630 metric tonnes from 266,638 metric tonnes.
Another cargo surveyor, Société Générale de Surveillance (SGS) will release its export report on Monday.
Spot ringgit weakened for the week to 3.211 from the lowest point at 3.1635 due to better-than-forecast economic growth in US which may lead to Federal Reserve tightening their monetary policy sooner than expected.
Market players are buying back the dollar after US’ economy showed signs of improvement.
The FCPO started the week on a strong note after the holiday due to further weakness in the ringgit which had underpinned the FCPO prices.
The FCPO price had tested the previous lowest level on Thursday but it refused to close below that level, thereafter.
For two days, the price broke below the 2,255 but near closing, the price was able to rise back and closed above the 2,255 level.
However, throughout the week the price had traded in a narrow range between 2,246 and 2,295 levels.
Technical view
As we mentioned in our previous weekly report, to cover the upside gap at 2,350, the price needs to break above the two minor resistance levels at 2,295 and 2,315; then, it may cover the upside gap at 2,350.
However, the said condition failed to establish itself this week as the price was unable to break above the 2,295 level.
Throughout the week, the highest point it touched was 2,294.
A positive candle managed to form on Friday which indicated that mild buying interest emerged after two days sell-off in the FCPO markets.
So, another long positive candle needs to be formed in the next trading sessions to show that the buying power is strong enough to push the FCPO price to break above the first minor resistance level at 2,295.
A close above the 2,295 level, it will challenge another minor resistance level at 2,315.
On the other hand, if the market fails to form a long positive candle in the next trading sessions, we expect palm oil price may linger in between the range of 2,246 and 2,295 levels.
Nevertheless, if the FCPO price closes below the 2,246 in the next trading sessions, it will challenge the support level at 2,210 and 2,200 psychological level.
Referring to the MACD Histogram, rounding bottom is forming up.
We should monitor closely whether the MACD Histogram is able to build up in the positive zone and also the MACD lines whether it is able to cross up the Signal line next week.
If the above mention conditions happen next week, the FCPO price may rebound shortly.
Major fundamental news this coming week
SGS report on August 4, 2014 (Monday).
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.