Malaysian palm oil futures edged slightly lower on Friday to 2,028, as the bullish momentum weakened after a strong week of gains.
The price climbed to a one-week high at 2,040 on Thursday, after bouncing from a five and half year low on Monday, at 1,914.
CPO prices climbed steadily, ending five weeks of bearish momentum. The government announced exports of crude palm oil will be exempt from export duty during September and October to help improve exports overseas, and offset the buildup of inventories in the coming months, and potential reduction of 1.6 million tonnes by the end of the year, according to Reuters. CPO price rose by 5.24 per cent between Tuesday and Thursday, the strongest three-day session gain since October, according to Reuters.
The government said this will increase crude palm oil exports by 600,000 tonnes over the next two months. FCPO benchmark November 2014 contracts settled at 2,028 which was up 98 points or 5.08 per cent from 1,930 last Friday. Trading volume increased to 175,675 contracts from 114,133 contracts totalled from last Tuesday to Thursday.
Open interest based on Thursday increased to 841,957 contracts from 761,125 contracts from last Tuesday to Thursday.
Cargo surveyor, ITS reported that exports of Malaysia palm oil products for August decreased by 4.3 per cent to 1.288 million compared with 1.354 million during July. Demand from the EU and China decreased, while India and the rest of Asia increased.
Another cargo surveyor, SGS report showed that palm oil export fell five per cent to 1.283 million for August compared with 1.35 million during July.
Spot ringgit strengthened slightly on Friday to 3.183, after reaching a week low at 3.1945 The ringgit eased as the dollar strengthened, reaching a 14-month high on Wednesday, as the US economy gathers momentum.
Investors anticipate the Fed will raise interest rates sooner than expected. Investors have sheltered against short positions in the ringgit, according to Reuters.
On Monday, the ringgit climbed from 3.15 to 3.18 as July trade data missed expectations. Exports rose 0.6 per cent, far below the 6.2 percent forecast, while imports contracted 0.7 per cent, according to Reuters.
ECB introduced lower benchmark interest rates and new monetary stimulus measures, in order to revitalise the eurozone economy. Malaysian palm oil stocks reached a seven-month high in August as stocks rose 16.4 per cent or 1.96 million tonnes as plantation workers return from a long weekend, and the monsoon season begins.
Palm oil production during August was up 15 per cent, however exports dropped 6.7 per cent, as overseas demand slows, according to Reuters.
Geo-political tensions eased in Ukrainian and Russian from an agreement for a permanent ceasefire, however top European leaders are still considering implementing sanctions on Russia.Elsewhere, according to Reuters, conditions in the US Midwest remain steady as rain and cool temperatures keep soybean on track to reach record high harvest.
Buyers remained cautious this week due to a potential oversupply of rival edible oils, according to Reuters.
Technical Analysis
By observing the weekly FCPO chart, throughout the week a bullish candlestick was formed, there is an indication that the price bottomed at support line 1,920 and then climbed, breaking the natural line at 2,000.
According to the FCPO daily chart, on Monday, the price tested support line 1,920, reaching a five and a half year low at 1,914, bounced the support line and broke resistance line 1,950, due to a weakening ringgit coupled with overseas soybean prices rising, and encouraging exports in August.
The price broke resistance line 1,990, on Thursday, and closed above 2,030, as the price continued to rise this week due to the government’s removal of crude palm oil export duty for the next two months, paired with improved exports in August, and increased physical demand.
The price remained within both the bottom and top bollinger band, bouncing the lower band on Monday, and the top band on Friday. As the price closed above 2,020, we will be observing, next week, the resistance lines at 2,040 and 2,090, and support lines located at, 1,990 and 1,950.
Fundamental Analysis
MPOB report on September 10, 2014 (Wednesday) ITS and SGS report on September 10, 2014 (Wednesday)
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